Anheuser-Busch InBev SA/NV Earnings - Q1 2025 Analysis
Positives
- EBITDA growth in Q1 was at the top end of the company's outlook.
- Underlying EPS increased by high single digits in US dollars and by 20% in constant currency, driven by organic growth and the ongoing optimization of the business.
- The company's results in Q1, the resilience of the beer category, the strength of its megabrands, and the continued momentum of its businesses all reinforce its confidence in its ability to deliver on its 2025 outlook of 4% to 8% EBITDA growth.
- Revenue increased by 1.5%, driven by the strength of the brand's portfolio and ongoing premiumization.
- Revenue and EBITDA grew by low single digits, with the company's performance driven by its premium and super premium brands which grew volumes by low teens.
Q&A Highlights - Q1 2025
Analyst asked about productivity programs and their impact on EBITDA, as well as the company's continued investment in the US market.
The company has implemented productivity programs to improve efficiency and reduce costs. These programs are ongoing and are expected to continue to build over the year, leading to a flatter EBITDA. The company also continues to invest in the US market, which represents over 20% of its business and has a lot of potential for growth. The company is focused on increasing market share and reaching new consumers through its balanced choices portfolio, which includes Michelob ULTRA, Michelob ULTRA Zero, and Busch Light. The company is also investing in its RTD portfolio, including NÜTRL and Cutwater, which are growing at a strong double-digit rate. The company believes that its investments in the US market will continue to drive growth and profitability.
Analyst asked about the company's channel mix in China, specifically the impact of the on-trade channel.
The company's channel mix in China is currently weaker in the on-trade channel, which has been impacted by the COVID-19 pandemic. However, the off-trade channel is performing well, and the company is focused on expanding its presence in this channel. The company is also investing in its megabrands, such as Budweiser and Harbin, and is seeing positive results in terms of preference and STRs. The company is accelerating the expansion of its off-trade business, which it believes will lead to improved results. The company is also focusing on innovation, such as Harbin Zero Sugar, which is scaling up quickly. The company believes that its volume performance will improve in the coming quarters, driven by its focus on productivity programs, investments in the US market, and expansion of its off-trade business.
Analyst asked about the company's view on the broader consumer environment and how it has evolved since the last update.
The company's outlook remains the same, and they haven't changed it. They are actively monitoring the consumer environment, and while consumer sentiment is down due to the election year, consumer behavior remains positive. Beer is more resilient than other categories, and the underlying demand for the company's brands is very positive. Innovation is driving growth, with non-alcoholic beverages being an important driver.
Analyst asked about the company's outlook for costs, specifically regarding hedges and translation.
The company has hedges in place to manage costs, and they have visibility into their cost of goods sold. The devaluation of emerging markets in the second half of 2024 will impact the first quarter of 2025, but the company expects to manage this pressure. Translation costs will have more pressure in the first half of 2025, but easier comps are expected in the second half. The company's local nature and minimal impact from tariffs leave them confident in maintaining their outlook.
Analyst asked about the company's performance in China and Argentina and if they should be encouraged about the coming quarters and years.
The company's performance in China is good, with strong brands and a rebounding on-trade business. The off-trade growth is happening fast, but the company needs to tweak their sales force and road to market to capture this opportunity. Strong brands are the key asset, and the company has them in China. In Argentina, the industry is improving, and the company's business is in a good cash flow position with strong brands and positive market share. The macroeconomics need to improve, and consumer purchasing power needs to return, but the company is confident in seeing an improvement in volume and profitability.
Analyst asked about the company's performance in April, specifically regarding the impact of the weather and Easter timing on consumer behavior.
Fernando Mommensohn Tennenbaum, Chief Financial Officer, explained that the company saw an improvement in April due to the weather and Easter timing, but cautioned that the company may face pressure on its transactional cost of goods sold in the coming months. He also noted that the company's outlook remains unchanged, with a target of 4% to 8% margin improvement.
Analyst asked about consumer demographics and specific states where the company is seeing signs of weakness in consumer confidence since the beginning of the year.
Michel Dimitrios Doukeris, CEO, responded by explaining that the company's performance in the US has been impacted by the weather and precipitation patterns, leading to a tough industry in January. However, he noted that the company's brands are gaining participation in the US market, and that the company's portfolio covers all price points, including strong value brands. He also emphasized that the company is well-positioned to cover the current environment, with a portfolio that includes premium and mainstream brands.