Anheuser-Busch InBev, the world's largest brewer, hiked its merger synergy target and slashed capital expenditure after reporting better than expected fourth-quarter results today.
The company, formed from InBev's $52 billion takeover of Anheuser-Busch last year, forecast that it would now realise synergies of $2.25 billion, compared with a previous goal of "at least" $1.5 billion evenly spread over three years.
It added it had already found $250 million in 2008, would find $1 billion this year and the remainder in 2010 and 2011.
The brewer of Stella Artois, Beck's and now Budweiser, said the much-watched EBITDA (earnings before interest, tax, depreciation and amortisation) rose by a like-for-like 5.3 per cent to €1.72 billion ($2.16 billion).
A Reuters poll of 16 analysts had produced an average forecast of €1.57 billion. Volume growth dropped by 1.8 per cent, although rose in North America and the southern part of Latin America, notably Argentina. Total revenue increased by 4.2 per cent to €5.25 billion, against expectations of €4.95 billion.
Trevor Stirling, analyst at Sanford Bernstein, described AB InBev's fourth-quarter figures as reasonable, with better numbers in Anheuser-Busch and less favourable in old InBev.
"The synergies and capital expenditure targets are better than expected. For the
The raised target synergy would largely come from implementation of its "zero-based budgeting" cost drive in the United States, combining UK businesses and logistics improvements in China.
AB InBev said it planned capital expenditure in 2009 of €1.4 billion, some €800 million lower than in 2008 and that it would seek to release at least $500 million from
Rivals Heineken and Carlsberg, who jointly bought Scottish & Newcastle last year for £7.8 billion ($11.01 billion), pledged in February to slash debt, costs and spending in anticipation of a recession-hit 2009.
AB InBev's chief financial Officer Felipe Dutra said fundamentals remained strong and that margins should expand this year with pricing actions and volumes currently stable. The beer market was resilient but not immune to downturns.
"What happens is people trade down from spirits and wine to beer and shift from on-premise to off-premise, but not necessarily from beer to water," he told a conference call.
The company said that cost of sales per hectolitre rose by 9.1 per cent in 2008, above the company's own expectation of 5 to 6 per cent. Chief executive Carlos Brito and most of the executive board would not receive a bonus.
"We largely failed to meet our targets. We have no excuses," Mr Dutra said.
Reuters