The Best Beer Company in a Better World. Krista Tremblay BUS 210A

Transcription

1 The Best Beer Company in a Better World. Krista Tremblay BUS 210A

2 Introduction Anheuser-Busch InBev Anheuser-Busch InBev is a publicly traded company based in Leuven, Belgium, with American Depositary Receipts on the New York Stock Exchange. AB InBev is the world s largest brewer by volume and one of the world's top five consumer products companies, with over 200 beer brands. Beer (90.3%) Non-Alcoholic Beverages (9.7%) Ending date of the latest FY: December 31, 2012 CEO: Carlos Brito

3 Geographic Area of Activity Over 200 beer brands present in over 23 countries, through 6 operational Zones: North America, Latin America North, Latin America South, Western Europe, Central & Eastern Europe, and Asia Pacific. Three categories of brands: Global Brands Multi-country Brands Local Champions Acquisitions of other brands/breweries: 137 beverage plants

4 Global, Multi-Country, and Local Champions

5 Audit Report Independent Auditor: Yves Vandenplas (PwC Bedrijfrevisoren Bevba) The independent auditor believes that AB InBev s consolidated financial statements give a true and fair view of the company s financial position as of December 31, The auditor also believes that the given consolidated financial statements and the results and conclusions drawn from such reports are in accordance with the IFRS and consistent with the legal and regulatory standards applicable in Belgium. In addition to the given above statement, the independent auditor does recognize that he is unable to comment on the description of the principal risks and uncertainties that the subsidiaries of AB InBev are facing, the financial position of such subsidiaries, and the significant influence of certain figures on their future development. However, the auditor states that these matters do not present any inconsistencies with the information provided in the audit.

6 Stock Market Information NYSE (BUD) Most recent price: $92.13 (05/31/13) Twelve-month trading range: 52 week high: $ (04/10/13) 52 week low: $64.99 (06/1/12) Dividend per Share: $2.22 As announced on August 24, 2013 NYSE Euronext Brussels (ABI) Most recent price: (05/31/13) Twelve-month trading range: 52 week high: (04/03/13) 52 week low: (06/1/12) Dividend per Share: 1.70 Euro As announced on August 24,

7 Buy, Sell, Hold? AB InBev is currently paying out a decent dividend, which suggests a certain level of financial well-being. Furthermore, AB InBev has a stable dividend payment history, which suggests that the company will continue to pay out decent dividends. From this, I would advise holding this stock in order to generate immediate income. In addition, the successful and recent launch of many new products suggests an upward trend in the price and value of the share. Bud Light Platinum most successful beer launch of Llime-a-Rita the second fastest growing brand in its category. And the launch of new brands that have gathered many followers around the world Harbin Cooling Jupiler Force Leffe Royale

8 Income Statement

9 Analysis of Income Statement This Income Statement is multi-step. The gross profit has increased from both an increase in revenue and a decrease in the cost of goods sold. The increase in revenue suggests increased sales, and the decrease in cost of goods sold suggests efficiency improvements in the production and sale of the company s goods and services. The income from operations has also increased, though only by a small margin. This increase suggests that there was either a small increase in assets or small decrease in liabilities that came from an increase in the company s operating activities over a period of time. Net income has increased relatively drastically. This is a result of the increase in gross profit and income from operations, as well as fairly stable expenses over the past two years and decreases in other costs such as finance costs and cost of sales. Such increases in sales and profit is encouraging, and the decreases in cost of sales and other finance costs suggests that AB InBev is encouraging efficiency in their value chain.

10 Balance Sheet

11 Analysis of Balance Sheet - Assets Current Assets Increase of 8,307 million USD, which is encouraging and suggests an increase in items that will bring future economic benefit. Long-term Investments Increase of 431 million USD, which suggests that AB InBev has invested in assets that will provide benefits over a long period of time. Property, Plant, and Equipment Increase of 439 million USD, which suggests development and improvement in the property, plant, and equipment that is used in day-to-day operations. Intangible Assets Increase of 1,017 million USD, which suggests development and the launch of new products/brands.

12 Analysis of Balance Sheet L & SHE Current Liabilities Increase of 764 million USD, which is much smaller than Current Assets. This is encouraging and suggests that AB InBev s solvency position is quite strong. Non-Current Liabilities Increase of 5,033 million USD, which is expected, given AB InBev s increase in Assets. Shareholder s Equity Increase of 4,397 million USD, which came mainly from an increase of 3,857 million USD in Retained Earnings. This is promising because it suggests that AB InBev is taking past profits and reinvesting in the business to create even greater future profits.

13 Statement of Cash Flows

14 Analysis of Statement of Cash Flows The cash flows from operations for both 2011 and 2012 are greater than the net income. After further evaluation of the consolidated financial statements, it is apparent that AB InBev has experienced growth from 2011 to 2012 through increases in investing activities such as the following: 439 million USD in new property, plant, and equipment. 464 million USD in new goodwill. 553 million USD in new intangible assets. 394 million USD in new investments in associates. 12 million USD in new investment securities. 134 million USD in new deferred tax assets. 2 million USD in new employee benefits. Note: there was a decrease in trade and other receivables of 111 million USD. AB InBev s primary source of financing is through long-term borrowing (18,463 million USD in 2012). Cash has increased from 5,312 million USD in 2011 to 7,051 million USD in 2012.

15 Significant Accounting Policies 1. Basis of Preparation and Measurement 2. Functional and Presentation Currency 3. Use of Estimates and Judgments 4. Principles of Consolidation 5. Summary of Changes in Accounting Policies 6. Foreign Currencies a. Foreign Currency Transactions b. Translation of the Results and Financial Position of Foreign Operations c. Exchange Rates 7. Intangible Assets a. Research and Development b. Supply and Distribution Rights c. Brands i. Software ii. iii. iv. Other Intangible Assets Subsequent Expenditure Amortization v. Gains and Losses on Sale d. Business Combinations e. Goodwill 7. Property, Plant, and Equipment a. Subsequent Expenditure b. Depreciation c. Gains and Losses on Sale 8. Accounting for Leases 9. Investments a. Investments in Equity Securities b. Investment in Debt Securities c. Other Investments 10. Inventories 11. Trade and Other Receivables 12. Cash and Cash Equivalents 13. Impairment a. Calculation of Recoverable Amount b. Reversal of Impairment Losses 14. Share Capital a. Repurchase of Share Capital b. Dividends c. Share Issuance Costs 15. Provisions a. Restructuring b. Onerous Contracts c. Disputes and Litigations

16 Significant Accounting Policies 16. Employee Benefits 17. Bonuses a. Post-Employment Benefits i. Defined Contribution Plans ii. Defined Benefit Plans b. Other Post-Employment Obligations c. Termination Benefits 18. Share-Based Payments 19. Interest-Bearing Loans and Borrowings 20. Trade and Other Payables 21. Income Tax 22. Income Recognition 23. Expenses a. Goods Sold b. Rental and Royalty Income c. Government Grants d. Finance Income e. Dividend Income a. Finance Costs b. Research and Development, Advertising and Promotional Costs and System Development Costs c. Purchasing, Receiving and Warehouse Costs 24. Derivative Financial Instruments a. Cash Flow Hedge Accounting b. Fair Value Hedge Accounting c. Net Investment Hedge Accounting 25. Segment Reporting 26. Non-Recurring Items 27. Discontinued Operations and Non-Current Assets Held for Sale 28. Recently Issued IFRS a. Financial Instruments b. Consolidated Financial Statements c. Joint Arrangements d. Disclosure of Interests in Other Entities e. Fair Value Measurement f. Employee Benefits g. Separated Financial Statements h. Investments in Associates i. Other Standards, Interpretations and Amendments to Standards

17 Financial Analysis Liquidity Ratios Working Capital CA(20,630) CL (20,408) Working Capital WC is fair relative to AB InBev s size and capabilities. = $222 million USD Current Ratio CA (20,630) / CL (20,408) = Receivable Turnover Net Credit Sales / Avg. Accts. Rec (39,758) / ((4,023+4,121)/2) = 9.76 Average Days Sales Uncollected 365 / Receivable Turnover (9.76) = 37.4 days Current Ratio The current ratio is not at an ideal rate; however, it is above 1, which suggests that the company should be able to pay its short term obligations as they come due. Receivable Turnover This number is healthy, suggesting that AB InBev is doing a fairly good job at balancing its credit sales with its ability to collect debts. Average Days Sales Uncollected This number is encouraging with a fairly short collection period.

18 Financial Analysis Liquidity Ratios Inventory Turnover COGS (16,477)/Avg. Inv ((2,500+2,466)/2)) = Inventory Turnover This number is relatively low, which suggests a modest amount of inventory on hand. Average Days Inventory on Hand 365/Inventory Turnover(6.6459) = days Average Days Inventory on Hand This number is fair considering the sheer quantity of inventory held. Operating Cycle Days Sales + Day s Inventory Operating Cycle The operating cycle is short and healthy = days

19 Financial Analysis Profitability Ratios Profit Margin Net Income / Revenue =.2373 Asset Turnover Sales / Avg. Total Assets 39,758 / ((122, ,427)/2) =.3383 Return on Assets Net Income / Avg. Total Assets 9,434 / ((122, ,427)/2) = $.0803 Return on Equity Net Income / Avg. SHE 9,434 / ((45,441+41,044)/2) = $.2182 Profit Margin AB InBev has a very healthy profit margin. Asset Turnover This number is very healthy, stating that sales per asset is at almost $.34. Return on Assets Return on Assets is a very positive revenue of $.08 per asset turned. Return on Equity Return on Equity is also very encouraging, suggesting that AB InBev is making decent returns on money invested by its shareholders.

20 Financial Analysis Market Strength Ratios Earnings per Share Net Income / Avg. # Common Shares Out. 9,434 / ((1,734+1,734)/2) = $ Price/Earnings Ratio Price/Earnings per Share This number is fairly strong, which suggests a fairly high value to its per-share earnings. Mkt. Price per Share / EPS $ / $ = Dividend Yield Dividends per Share / Mkt. Price per Share NYSE: $2.22 / $92.13 = $.0241 NYSE Euronext Brussels: 1.70 / =.0239 Dividend Yield This dividend yield is decently strong, suggesting a fairly high return on equity investment.

21 Financial Analysis Solvency Ratios Debt-to-Equity Avg. Total Liabilities / Avg. SHE 74,281.5 / 4, = Financing Gap Days Payable ( ) > OP Cycle (92.32) = NONE Debt-to-Equity The debt-to-equity is fair, suggesting that AB InBev is financing a decent amount of its growth with debt and equity. Financing Gap There is no financing gap, which is very encouraging. Furthermore, with such a huge gap between days payable and operating cycle, there is little room for concern.

22 The Global Brewing Industry The US brewing industry continues to grow, seeing an increase in beer sales in 2012 of.9% by volume [brewersassociation]. Despite still recovering from the most recent economic downturn, the global brewing industry has continued to experience growth and has seen increased consumption in the past year. Recent regulatory and tax changes in parts of Europe have decreased beer consumption; however, such markets are beginning to see more stability as the dust settles. Moving forward, the future of the global brewing industry looks bright, as a strengthening economy and a more accessible global marketplace emerges. Movement towards microbreweries encourages diverse portfolios. Trend towards traditional and craft brands.

23 AB InBev in a Global Position AB InBev continues to invest in new opportunities with brands and by expanding into new markets. Increased revenues in 2012 were no doubt attributable to favorable brand mix and management initiatives. AB InBev continues to focus on innovation as the driver of its success innovation of new products, packaging, processes, and connections. AB InBev has continued to lead the market by investing in top line products, maintaining a strict cost discipline, and pursuing margin enhancement. Budweiser outside of the US accounts for over 51% of global Budweiser volume. Volumes grew in the US for the first time since 2008 and market share is showing signs of stability. Budweiser consolidated its position as the leading premium beer in China, growing its volume by double-digits. AB InBev agreed to acquire majority stakes in four breweries in China, established greenfield breweries in Fuijan and Henan during 2012, with four more greenfield breweries to open in the next two years. AB InBev acquiring the rest of Grupo Modelo: will double the sales of the company, enhance earnings, free cash flow, diversify profit stream. AB InBev is continuing to look for new avenues of expansion, both in market reach and in brand diversification. Looking into non-alcoholic markets, with introduction of products such as Stella Artois Cidre and Juniper Breeze.

24 An Innovative Growth Strategy North America Volumes increased by.5% in 2012 Latin America South Volumes increased by.1% in 2012 Latin America North Volumes increased by 2.7% in 2012 Western Europe Volumes decreased by 4.2% in 2012 much due to economic conditions. Central & Eastern Europe Asia Pacific Volumes decreased by 11.3% for 2012 much due to industry weakness and impact of regulatory and tax changes. Volumes increased by 1.9% in 2012 New initiatives Bud Light Platinum Bud Light Lime Lime-a-Rita Increased Shock Top Choices Stella Artois Cidre non-alcoholic Leffe Royale introduced in Belgium Juliper Force non-alcoholic Quilmes Night Harbin Cooling

25 Executive Summary Anheuser-Busch InBev is a publicly traded company based in Leuven, Belgium, with American Depositary Receipts on the New York Stock Exchange. AB InBev is the world s largest brewer by volume and one of the world's top five consumer products companies. AB InBev aims to be the best beer company in a better world by pursuing a broad differentiation strategy with over 200 beer brands in over 25 countries. Despite recent economic fluctuations, AB InBev has continued to grow with new brands and into new markets. With a heavily diversified portfolio, AB InBev has been able to maintain its industry leading position by offering many different products to a wide array of consumers. Furthermore, AB InBev is looking towards future growth by expanding its presence in markets such as Brazil, China, Argentina, and Paraguay, and by entering into mutually beneficial partnerships (as seen by the recent merger with Grupo Modelo). AB InBev has maintained a leading position in an increasingly connected world by capitalizing on strong relationships with its consumers. Campaigns such as the Green Box Project, The Big Time, and Shock Top Cruisers are all such evidence of this. In the coming years, overall profits are expected to rise as the economy continues to stabilize, especially in Europe, and as new growth opportunities come about (FIFA 2014 and the Rio Olympic Games in 2016).