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The share price has fallen more than 25% since the SABMiller merger.
The share price has fallen more than 25% since the SABMiller merger.

AB InBev jumps 3% in intraday trading on improved growth prospects


By Maarten Mittner - May 11th 2018, 08:50

The share price has fallen more than 25% since the SABMiller merger. 

Beer giant Anheuser-Busch InBev (AB InBev) jumped more than 3% on the JSE, as the market took a bullish view on the group’s upbeat first-quarter results update.

The share price rose 3.5% to R1,277 after the update, the best in nearly two weeks, as the integration with SAB continues to progress well, the group said. It ended the day flat at R1,231.52 on a stronger rand.

Progress made with cost-cutting pleased the market, with the share regarded as undervalued. Expected synergies were put at $3.2bn in 2016 on the conclusion of the SABMiller merger. The group has now achieved a targeted $2.293bn, with the remaining $900m to be reached in two to three years.

AB InBev is able to use its scale and distribution to leverage acquisitions which it makes, said analysts on the Seeking Alpha website.

Cost cutting at SAB came to $547m, with $160m achieved in the reported first quarter. SAB saw revenue growth of mid-single digits in the quarter, driven by high single-digit revenue per hectolitre growth, AB InBev said.

“We expect to deliver strong revenue and earnings before interest, tax and depreciation (ebitda) growth for the group in the 2018 financial year, driven by the solid performance of our brand portfolio,” the group said.

The prospect of higher dividend payouts also buoyed the share price.

“We continue to expect dividends to be a growing flow over time, although growth in the short term is expected to be modest given the importance of deleveraging,” the group said.

AB InBev is under pressure to deliver greater shareholder value following the SABMiller merger. The share price has fallen more than 25% since the merger. The stronger rand at the end of 2017 has affected the share price negatively in JSE trade, having lost 6.7% since January. It ended 2017 6% lower.

Group revenue grew 4.7% to $13bn in the quarter to end-March, compared with the previous quarter in 2017, with revenue per hectolitre growth of 4.9%. Total volumes declined by 0.2%, while own beer volumes grew 0.5%, which was slightly better than expectations.

Read more about: sabmiller | liquor news | jse | ab inbev

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