How South Africa’s alcohol ban has hit brewing giant AB InBev – Wall Street Journal

South Africans drink a lot of beer: AB InBev, which bought SAB Miller in 2016, makes one in four beers sold globally, and we are one of its biggest markets. So it's not surprising that the company took a $2.5 billion write-down tied to a worst-case scenario for how the coronavirus pandemic would affect sales here. Their scenario was not wrong, as we now know: the government has twice banned the sale of alcohol to take pressure off hard-pressed health services. Those alcohol bans show in AB InBev's sales figures – the company says volumes in South Africa have dropped over 60% in the quarter. So as South African drinkers bemoan their empty fridges and the effect of the ban on the economy, its worth remembering that the ban has global ramifications. – Renee Moodie.Budweiser brewer takes $2.5 billion write-down in South Africa over Covid-19.By Saabira Chaudhuri.Anheuser-Busch InBev NV reported a sharp drop in second-quarter sales as beer consumption across much of the world dropped and took a $2.5 billion write-down on its business in South Africa, where alcohol sales have been banned..___STEADY_PAYWALL___.Still, revenue topped analyst estimates, and AB InBev — which makes one out of every four beers sold globally — said its performance was improving rapidly. Though volumes fell 32% in April and 21% in May, they rose 0.7% from a year earlier in June..Shares in the company rallied 8% on Thursday..Also read: Taverns call to lift ban on alcohol sales immediately, want R100m for survival.The Budweiser brewer said global revenue dropped 18% on an organic basis, compared with the year-earlier quarter. That strips out currency changes and acquisitions and beat analysts' forecasts for a 23% decline.Covid-19 propelled many countries the world over to institute lockdowns that required consumers to stay at home and bars and restaurants to shut. In the U.S., brewers have been hit less badly than elsewhere because the majority of beer is sold through supermarkets, which have remained open..Big bet on Africa.AB InBev said its U.S. revenue dropped 5.9%, a stronger performance than in most other regions, helped by the gradual reopening of bars in many states. In recent weeks, however, some parts of the U.S. have been hit by climbing infection rates and deaths, triggering new restrictions..In South Africa, one of AB InBev's biggest markets, the company took a $2.5 billion write-down tied to a worst-case scenario for how the virus will affect sales there..AB InBev made a big bet on Africa a few years ago when it bought SABMiller in a $100 billion-plus deal..South Africa, in particular, has emerged as one of the hardest-hit countries by the pandemic. The country has twice banned alcohol sales to curb pressure on the nation's health service. On Thursday, AB InBev said volumes in South Africa dropped over 60% in the quarter..AB InBev's shares have been under pressure in recent years as the company's debt has ballooned following the 2016 deal to buy SABMiller, then the world's second-largest brewer. In the year to date, the share price has dropped by a third, due to additional concerns about Covid-19 and weakening currencies from emerging markets.'Beer will continue to thrive'.AB InBev's net profit for the three months ended June 30 plunged to $351 million from $2.48 billion a year earlier, despite a $1.9 billion one-time-gain tied to the sale of its Australia business. Revenue fell to $10.3 billion from $13.6 billion.Like many companies, AB InBev didn't offer investors financial guidance for the year. It said, though, that beer as "a category that has existed for centuries through many crises and will continue to thrive long after the current crisis is behind us."Also read: From staggered hours to beer collection points – drink makers propose ways to ease booze banAB InBev said its net debt to earnings before interest, taxes, depreciation and amortization ratio was 4.86 at the end of June, up from 4 in December. The company has said it aims to reach a ratio of about 2.In Brazil — AB InBev's second-biggest market, behind the U.S. — volumes dropped 4.1%. The company said business had improved through the quarter, helped by the impact of government subsidies on consumer spending and strong growth in online beer sales.In China, which was hit by the virus first and has led the world in largely restarting swaths of its economy, volumes fell 0.4%. In June, AB InBev posted its highest beer monthly volumes in China, with most restaurants and bars reopened there.Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

How South Africa’s alcohol ban has hit brewing giant AB InBev – Wall Street Journal

Related Stories

Meet Tshepo Mahloele – Big Capitec shareholder, ABSIP’s “CEO of the Decade” now accused by Holomisa as kingpin of corrupt network

PREMIUM: Making of a great editor – the George Palmer playbook

Premium – BizNews global portfolio: ASML joins – so does Adobe as Bull takes hold again

Alec Hogg: Helen Zille predicts SA choice will be DA or EFF