AB InBev

AB InBev

31 October 2018Reading time: 2 minutes

The 2018 second quarter revenue of AB InBev rose with 4,7 percent on an annual basis to more than 14 billion dollar. The ebitda increased over the same period with 7 percent to 5,5 billion dollar. Despite these positive results, investors are concerned about the developments within several important markets of AB InBev. Due to a strong decrease in alcohol consumption among especially American youth, the revenue of the brewery plummeted within this market with 3,1 percent in the second quarter. Revenue growth also seems to be stagnating in Europe.

Therefore South-America and China have become important emerging markets for AB InBev. For example, in the second quarter the South-American market determined 43,5 percent of the total worldwide turnover of AB InBev. However, the financial crisis in Argentina and the political tensions in Brazil could pose a risk for the revenue of the brewery in these South-American countries.

For the Asian market, AB InBev saw sales increase by 6,6 percent and therefore this market now determines 16 percent of total worldwide sales. Meanwhile, competitor Heineken also works on strengthening their market position in especially China. The Dutch brewery recently bought a 40 percent stake in China Resources Beer Holdings. It remains to be seen if this will cause more competitive pressure for AB InBev on the Asian market.

Another risk for the results of AB InBev are the increasing commodity prices for grains and possible negative exchange rate effects. The Belgium brewery might also have to deal with a EU antitrust fine due to an ongoing lawsuit concerning market domination abuse. According to the European Commission, AB InBev would deliberately have prevented the distribution of cheaper beer from European countries to Belgium. Due to lower competitive pressure in Belgium, AB InBev charges higher prices for their products at this market, compared to countries such as France and The Netherlands. It remains to be seen how this lawsuit will end and how high a possible fine will be.

The stock price of AB InBev has dropped to the current (16-10-2018) price of 73,57 euro. The big question is whether AB InBev is able to respond well to all possible risks and can regain the trust of investors. The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

Vontobel products on Ab InBev are tradable at DEGIRO.

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23/10/2019 21:18:13