AB InBev is kicking off 2024 better than expected

AB Inbev performed better than expected in the first quarter. Due to the Bud Light crisis, Mexico has dethroned the United States as by far the beer giant’s most important profit engine. Investors are responding enthusiastically.

AB InBev

presents a relatively solid report on the first quarter. The world’s largest beer brewer saw sales volumes decline again, but the decline of 0.6 percent was smaller than analysts expected on average.

Thanks to price increases and cost savings, the brewer of Budweiser, Corona and Stella Artois was able to increase turnover and operating profit before depreciation (EBITDA) more than expected (see table below). The share rose about 4 percent at the opening of the Brussels stock exchange on Wednesday.

‘North America is less bad than expected. We may see some signs of improvement there,” notes Edward Mundy, analyst at the Jefferies stock exchange. Pro memoria: AB InBev became embroiled in a culture war exactly one year ago with its American flagship Bud Light. This has structurally affected sales of the lager: Bud Light lost market leadership to Modelo Especial from rival Constellation Brands.

This structural damage can be seen from the regional profit contributions: North America, long the group’s most important cash machine, saw its profit contribution decline by 17 percent compared to a year earlier to $ 1.16 billion.

On the plus side, in the shadow of the Bud Light fiasco, other regions have taken over the role as profit and cash flow drivers, important for reducing the high debt mountain. This is primarily the case for Mexico, together with Colombia the main part of what AB InBev calls ‘Central America’ in its reporting. In the region, 4 percent higher volumes lifted profit contribution a fifth higher to $1.89 billion.

The profit margin in Central America is also by far the highest in the group at 46.6 percent. In both Mexico and Colombia the market is almost a duopoly, with Heineken as the only major competitor. For comparison: in North America the margin is still 31 percent.

CEO Michel Doukeris maintains the forecast for an increase in operating profit of 4 to 8 percent for the whole of 2024, but now says he is ‘reinforced in the conviction’ that these ambitions will be achieved.