February 27, 2020 / 6:20 AM / 5 months ago

AB InBev sees 10% hit to first-quarter profit from coronavirus

BRUSSELS (Reuters) - The world’s largest brewer Anheuser-Busch InBev forecast a 10% decline in first-quarter profit on Thursday after the coronavirus outbreak hit beer sales during the Chinese New Year, sending its shares skidding.

FILE PHOTO: The logo of Anheuser-Busch InBev is pictured outside the brewer's headquarters in Leuven, Belgium February 28, 2019. REUTERS/Francois Lenoir/File Photo

The maker of Budweiser, Corona and Stella Artois said the virus had led to a significant decline in demand in China - both at bars and drinking at home, notably during the Chinese New Year.

The outbreak, along with an expected weaker Brazilian market, could lead to a 10% drop in first-quarter core profit (EBITDA) on-year, AB InBev said, adding that it expected 2020 core profit growth of between 2% and 5%, with most expansion occurring in the second half.

The Belgium-based company, which sells more Budweiser in China than in the lager’s key U.S. market, said the disease shaved up to $285 million off its revenue in China in the first two months of this year, 2.3% of its first-quarter group revenue last year.

It is the latest drinks company to warn that the outbreak is taking a toll on business, following Diageo’s alert on Wednesday that the fast-spreading virus in greater China and the Asia Pacific region could knock up to $260 million off its profit in 2020.

Nightlife ground to a halt in China in the third quarter last year, with many bars and restaurants shutting down due to the COVID-19 virus, AB InBev CEO Carlos Brito said, echoing comments from the world’s third largest brewer Carlsberg.

BRAZIL ALSO WEIGHS

“Our business is all about going to restaurants, to nightlife, going out with friends, it’s really about to go back to normal, we’re preparing for the surge when things return to normal,” Brito told reporters on a call.

Shares in AB InBev were down 7.5% to 57.25 euros in morning trade, the second weakest performer in the FTSEurofirst index of leading European stocks. Jefferies analysts said in a note that growth “is challenged with no more synergies and weak pricing”.

More than half of the company’s 33 Chinese breweries have reopened with the exception of the one in the central Chinese city of Wuhan, Brito said. The virus that can lead to pneumonia is believed to have originated in a market in Wuhan late last year.

The company’s fourth-quarter core profit declined 5.5% to $5.34 billion, worse than market expectations of a 1.9% drop.

“Our performance in 2019 was below our expectations, and we are not satisfied with the results,” Brito said.

Profit from both key markets - the United States and Brazil - dropped after AB InBev had oversupplied wholesales to the former earlier in the year, while higher costs for commodities and a weaker Brazilian real dented sales in the Latin American country.

AB InBev said results in Brazil in the first quarter would not match the very strong figures of the first months of 2019, when an exceptionally late Carnival led to revenue growth of 16.7%.

Reporting by Marine Strauss; Editing by Sherry Jacob-Phillips and Emelia Sithole-Matarise

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