AB InBev net profit down by 43% – beer consumption continues downward spiral

AB InBev, the global number one beer producer, announced on Thursday a net profit reduction of 43% in 2016.

The company, which completed its merger with SABMiller at the end of last year, saw beer sales continue to fall last year, and concluded that its annual results were below expectations.

The group stated in a communiqué that the fall in net profits could be explained by “an overall increase in net financial costs” owing to the purchase of SABMiller and “adverse currency movements.”

Although turnover increased by 2.4% to $45.5 billion, owing to the focus on AB Inbev premium brands, good results were however unachievable due to sales contraction of 5.4% in Brazil.

The consumer environment was indeed challenging with available real incomes decreasing and an increasing rate of unemployment. The group commented that the latter was at its highest level since 1995.

Overall, the total sold decreased by 2% to 500 million hectolitres. Total sales of the group’s beers dropped significantly by 1.4% and that of non-beers by 6.2%.

This having been said, the group is very pleased to see its market share increase in the majority of its key markets. An example of this is in Western Europe where a slight increase in sales was seen. There are no available figures for Belgium.

The EBITDA (earnings before tax, interest, depreciation and amortisation), is 0.1% lower than in 2015 and reached $16.7 billion. Sales costs increased compared to 2015, owing to the devaluation of the Brazilian Real, which reduced the profit margin.

The group writes in a communiqué, “When we do not reach our business objectives, we take responsibility for this. The 2016 annual results were disappointing, and therefore most of the Executive Board members will not take a bonus this year.”

Without stating the precise 2017 objectives, the group said that it is contemplating “the future with confidence” owing to the merger with SABMiller. The integration process for this is “well under way.”

The operating and general cost savings expected from the merger have gone from $2.45 to $2.8 billion. Some $282 million in operating cost savings were actually achieved last year.

In the light of these results, AB InBev will propose a dividend of €2 per share.

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