AB InBev, the maker of Budweiser, falls after weak sales in China drag on third quarter earnings
- Anheuser-Busch InBev, the global beermaker home of Budweiser, posted weak third-quarter earnings Friday weighed down by sales in China.
- Shares fell as much as 11% in early trading on the news.
- China is an important region as it's the largest beer market in the world, but AB InBev has struggled in the country. Revenue in the country declined by 0.2%, with volumes slipping 5.9%.
- Watch Anheuser-Busch InBev trade live on Markets Insider.
Anheuser-Busch InBev, the maker of Budweiser, is struggling to gain in China.
Shares of the beermaker fell as much as 11% in early trading Friday, erasing more than $20 billion in market value. The decline came after the Asian business that the company publicly listed a stake in last month to focus on China contributed to disappointing third-quarter results.
Here's what the beermaker reported, versus what analysts surveyed by Bloomberg expected:
- Revenue: $13.17 billion reported versus $13.61 billion (expected)
- Adjusted EPS: $1.22 reported versus $1.27 (expected)
- Adjusted Ebitda: $5.29 billion, or flat growth, reported versus $5.52 billion, growth up 3% (expected)
After the results, the company lowered its full-year earnings forecast, saying that it expects moderate Ebitda growth where it had previously stated that growth would be "strong."
AB InBev raised $5.8 billion by listing a stake in its Asian business, Budweiser Brewing Company APAC Ltd., last month. Growth in China - the world's largest beer market by sales, according to Euromonitor International - was a main reason for the company to list in Hong Kong.
But the company had weakness in the country this quarter. AB InBev's Ebitda growth in the country slowed to 11% this quarter from 24% in the second quarter. China revenue also declined by 0.2%, with volumes slipping 5.9%.
While China presents a large market for the beer company, alcohol consumption is falling off as the Chinese economy slides to its slowest pace of growth in nearly 30 years. In addition, new rules in China that prohibit sales of alcoholic drinks after 2 a.m. have dragged the industry down.
Challenges including shipment phasing into China, higher cost of sales, and "significant" commodity and currency headwinds also weighed on the quarter.
AB InBev isn't the only consumer beverage company that's been disappointed by its bet on China recently. Earlier this month, Pernod Ricard, the maker of Absolut vodka, was slammed when sales of its Chivas Regal whisky fell amid China's government crackdown on organized crime.
AB InBev reported that the highest-priced beers it sells in China, including Corona, had shipment growth of more than 10%, which shows a bright spot in the region, the company said.
Price increases in South Korea and Brazil also drove volume declines and slipping sales in those regions for InBev.
In addition, most sales and marketing spend in 2018 was driven by the World Cup in the first half of the year, whereas spend this year is more evenly spaced, the company said.
AB InBev is up 30% year-to-date.
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