In mid-April, a marketing campaign for Bud Light by transgender rights activist and social media phenomenon Dylan Mulvaney turned out to be a complete miscalculation for AB InBev in the US.
After all, conservative America reacted strongly by boycotting Bud Light and sales figures plummeted for months. Sales across North America fell 10%; -10.5% in the US. Organic (excluding acquisitions and divestitures) volume declines to 14.1% for North America.
In addition to increasing marketing costs for Bud Light to mitigate the damage, we see a 26% decline in adjusted EBITDA for North America (-28.2% in the US) resulting in an EBITDA margin (operating cash flow/sales) of 36.4. % in the second quarter of last year was 30.1% in the last three months.
However, AB InBev is active all over the world and thankfully so. North America’s share of revenue declined from 30 to 26% year-on-year, but Central America (countries such as Mexico, Colombia and Peru) quickly took over the torch with an increase in group turnover share. Approximately 24 to 27%. Turnover increased 14% (organic +10%), partially due to autonomous volume growth of 0.3%.
More important was adjusted organic EBITDA growth of 15.4%, resulting in an increase in EBITDA margin from 44.8 to a whopping 46.9% (average analyst expectation was 44.9%). Central America now accounts for 39% of the group’s adjusted EBITDA. North America drops to 24%.
Total quarterly revenue of $15.1 billion was up 2.2% from the year-ago quarter, but fell short of average market expectations of $15.41 billion. Organic growth was 7.2%. EBITDA margin fell to 32.5% from 34.5% year-on-year, while the market had feared a decline to 30.8%.
Adjusted organic EBITDA of 5% versus average expectations of +2.5% (adjusted EBITDA -3.7% to $4.91 billion). This should allow AB InBev to maintain adjusted organic EBITDA growth of 4-8% versus expectations in its full-year forecast. For example, Heineken had to cut it back.
Share AB InBev ‘Hold’
We are for it AB InBev stock Counseling. The permanence of volume losses in the US leads us to conclude that a valuation at 19 times expected earnings is too high to return to a buy rating.
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