11-12-2009 - Vol. 11 / No. 07US shipments slide was downside surprise in ABI statement this morning. AB dropped 1.5 mil bbls, 5.1%. Pushed 9-mo shipments drop to nearly 2% and AB now down almost 1% for 12 mos. Yet AB sales-to-retailers off “just” 2.8% in Q3, so it likely held or gained share of STRs in the qtr. For 9 mos, AB STRs -0.6%, same pace as MillerCoors. ABI blamed Q3 volume softness on tuff comp from last yr and attempts to “optimize production costs—through balanced brewery utilization -- and to reduce out of pattern transportation costs.” Also noted that “weak summer industry” led to “high inventories at the distributor level.” ABI expects “improving volume comparisons in the 4th quarter” globally (global volume off 6% as reported, 3% organically).
ABI’s financial picture much brighter, per usual. Tho reported Q3 global revs -10%, rev per bbl up 3.9%. ABI got organic normalized EBITDA growth of 12% and expanded margins again. In North America, ABI reported organic (excluding impact of currency fluctuation) rev drop of 2.2%, lower cost of sales, distribution, mktg and admin. So organic earnings up double-digits and normalized EBITDA margin expanded almost 6 pts to 35.9%. Integration of AB “ahead of plan,” said ceo Carlos Brito. Got another $265 mil of synergies in Q3, pushing that figure to $875 mil for 9 mos. Then too, asset sales ahead of goal, so now ABI “can focus all of our efforts on growing our core business, including realizing top line synergy opportunities not considered in our $2.25 billion US” commitment. More focus on top line can’t come too soon, as analysts noted volume and rev weaker than even low expectations. “Eventually you’ve got to grow the top line; you can’t go on cutting costs forever,” Andrew Holland of Evolution Securities told Bloomberg. “They’ve had five years of cutting their way to greatness and probably only another year left.”
