Anheuser-Busch sharply hikes dividend, plans $1bn share buyback

Anheuser-Busch InBev, the world's largest brewer, announced a sharply higher dividend and a $1-billion share buyback on Thursday, promising increased investor returns in years ahead.

It also forecast improved beer sales in most of its major markets this year, particularly with the growth in emerging markets of higher priced premium brands such as Budweiser, 60 per cent of which is now sold outside the United States.

The cash-rich, Belgium-based company proposed a total dividend of €3.00 for 2014, a jump from €2.05 for 2013. Analysts had on average been expecting €2.92.

“Our goal is to reach a dividend yield of 3-4 per cent in line with other consumer goods companies,” chief financial officer Felipe Dutra told a conference call after a 2014 payout equivalent to 2.7 per cent.

AB InBev said it would be buying back $1 billion of its shares over the course of 2015, many of them used to cover employee stock ownership schemes.

Shares in AB InBev, up 17 per cent already this year, were little changed in early trading, with a higher dividend offset by softer than expected fourth-quarter earnings.

The maker of Budweiser, Stella Artois and Corona beers said industry volumes in the United States, its largest market, should improve after a 0.6-per cent overall dip in sales to retailers in 2014. AB InBev sells almost half of all the beer drunk in the United States

Beer industry volumes would continue to grow in Mexico, the world’s fourth largest market in terms of profit, and return to growth in China, after a four percent drop in volumes in 2014 due to an economic slowdown and poor weather. AB InBev’s own China volumes grew 1.6 per cent last year

For Brazil, the world’s second largest market where it has a two-thirds share, it said net revenues should grow by a mid- to high single digit percentage, helped by continued growth of premium brands.

Sales of Budweiser in Brazil grew by over 40 per cent last year, with such premium brands now making up eight percent of the market there, still below levels in other parts of the world.

Analysts have expressed concern that AB could find 2015 difficult in Brazil after a year that was boosted by the soccer World Cup there and with economic problems mounting.

“Although the macroeconomic environment in Brazil is challenging, we believe the underlying fundamentals for our business remain sound,” Dutra said, citing an expected growth in those legally allowed to drink and scope for expansion in north and northeast regions.

Overall, fourth-quarter core profit rose 5.6 per cent on a like-for-like basis and excluding currency effects to $5.07 billion, below the average $5.31 billion forecast in a Reuters poll. China margins were hit and savings in Mexico, where AB InBev took control of Modelo in 2012, were limited.

Reuters