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The world’s largest brewer ABInBev (ABI) has posted “solid” annual revenue growth of 4.8% driven by pricing and mix improvement.

Total sales grew by 4.8% in 2018 to US$56.4bn and by an improved 5.3% in the fourth quarter of the year, with revenue per hl growth of 4.5% in the year and 4.9% in the quarter.

The sales rise was driven by its global premiumisation strategic as well as “revenue management initiatives” as volume growth was more modest.

However, sales in its key North America market declined by 0.7% in 2018 while growing by 1.3% in the fourth quarter.

Mexico was its best performing market this year in both top and bottom line delivery, while revenue and market share grew in other important markets including China, Western Europe, Colombia and several African countries including Nigeria.

Total volumes grew by 0.3% in the year, with own beer volumes up 0.8% and non-beer volumes dropping 3.6%.

Fourth quarter total volumes were up by by 0.3%, with own beer volumes up 1.2% and non-beer volumes slumping 4.9%.

Combined revenues for its three key global brands, Budweiser, Stella Artois and Corona, grew by 9% in the year and 9.8% in the fourth quarter. Outside of their respective home markets, these global brands grew by 13.1% in 2018 and by 12.6% in the quarter.

EBITDA increased by 7.9% to US$22bn as a result of top-line growth and enhanced by its cost control measures and synergies from its acquisition of ABInBev.

EBITDA margin expanded by 118 bps to 40.4%.

However, headlines profits fell back to US$6.8bn in the year from US$8bn in the previous year as it was negatively impacted by mark-to-market losses linked to the company’s hedging of its share-based payment programs. Stripping out this issue, underlying profits were up to US$8.6bn from 8.3bn.

The SABMiller integration resulted in synergies and cost savings of $805m in the year, with the merger now having delivered $2.9bn on the expected $3.2bn of synergies and cost savings so far.

The group’s shares have been hit in recent times by worries over its debt pile. Net debt to normalized EBITDA decreased to 4.6x for the 12-month period ending 31 December 2018 from 4.8x for the previous period. AB InBev expects net debt to EBITDA ratio to be below 4x by the end of 2020.

The group said that in 2019 it expects to deliver “strong” revenue and EBITDA growth, driven by the solid performance of its brand portfolio and commercial plans.

“Our growth model is even more focused on category expansion, targeting a more balanced top-line growth between volume and revenue per hl.

“We expect to deliver revenue per hl growth ahead of inflation based on premiumization and revenue management initiatives, while keeping costs below inflation.”

Morning update

Newly listed UK ready meals specialist Bakkavor posted a 2.2% rise in headline revenues last year, thought start-up costs for international businesses hit profits.

Reported revenue for the year increased by 2.2% from £1.8bn to £1.86bn, which representing like for like growth of 3.2%.

UK revenues were up 1.1% to £1.66bn, with like for like growth of 1.8% in the year. Its international revenues – which now make up 11% of overall sales – grew by 12.9% to £201.6m.

Bakkavor said this was a “robust” sales performance “given the continued challenging market conditions in the UK, especially the high levels of inflation and weak consumer confidence”.

Adjusted EBITDA increased by 0.6% from £152.6m to £153.5m in 2018.

However, operating profit decreased by 11% from £96.2m to £85.6m in 2018.

Bakkavor said this decrease was primarily due to an “increase in pre-commissioning and start-up costs” for its international business.

It said trading performance before these costs, in an environment of limited volume growth, improved slightly compared with the prior year as efficiency benefits and a tight control of overheads helped offset inflationary pressures.

It warned that subdued consumer confidence and inflationary pressures have continued into 2019, and therefore its “remains cautious and expect little improvement in underlying market conditions”.

“Consequently, we expect limited growth in the UK and a corresponding decline in the group’s EBITDA margin in the first half of the year.”

However, it anticipates an uplift in UK revenues in the second half as its benefits from recently secured new business, leading to a significant improvement in trading in the second half of the year making group performance to be broadly in line with 2018.

CEO Agust Gudmundsson said: “We delivered a robust performance in 2018, successfully driving growth across our UK and International businesses against a backdrop of significant market challenges. This reflects our market-leading expertise in producing great tasting fresh food, the quality of our people and our strong partnerships with customers.

“We remain confident that our strategy, combined with our scale and expertise leaves us well-placed to capitalise on further growth opportunities within the attractive FPF market, both in the UK and overseas.”

British American Tobacco (BATS) “performed well” in 2018 as it attempted to reassure investors it would cope with forthcoming regulatory changes in the US.

Group wide revenues grew 25.2% to £24.5bn after being inflated by the full year effect of its RAI acquisition.

The FTSE 100 tobacco giant posted more representative adjusted revenue growth of 3.5% driven by total price/mix growth of 7% and 95% growth of tobacco alternatives to £901m at constant rates of exchange.

It said it had outperformed the wider combustibles market, with market share up 40 bps and strategic cigarette brand volume up 4.8%, while total volumes were down 3.5% on a representative basis.

It made “excellent progress” in tobacco heating products (THP) and vapour, with adjusted revenue almost doubling after benefiting from the growth of vapour in the US, increasing 20%, and growth in glo, notably in Japan.

“With an excellent product pipeline, the group continues to expect strong new category growth, leading to new category revenue of £5bn by 2023/2024,” it said.

Adjusted profit from operations up 4% and adjusted operating margins higher by 40bps, at current rates

Outgoing CEO Nicandro Durante commented: “”BAT performed well in 2018, exceeding our target of high single figure adjusted constant currency EPS growth, whilst continuing to invest in long-term sustainable returns… On an adjusted, constant currency, representative basis, this was a strong performance across the business.”

He added: “We recognise that the proposed potential regulatory changes in the US have created some investor uncertainty. We have a long experience of managing regulatory developments, a track record of delivering strong growth while investing for the future and an established multi-category approach.

“Looking into 2019 we are confident of another year of high single figure adjusted constant currency earnings growth and this confidence is reflected in our Board’s proposal to increase the dividend by 4%”.

On the markets this morning, the FTSE 100 is down another 0.8% to 7,051.4pts as the pound continues to climb on hopes of a softer Brexit plan being agreed.

Bakkavor shares have slumped 12.4% on this morning’s warning about first half earnings.

ABI shares are up 5.3% to €69.35, while British American Tobacco is down 2.7% to 2,720.7p.

Early risers include Nichols (NICL), up 2.9% to 1,595p, Carr’s Group (CARR), up 2.4% to 174p and Just Eat (JE), up 1.2% to 1731.4p.

Fallers Imperial Brands (IMB), down 2.2% to 2,477p, Diageo (DGE), down 1.5% to 2,893p, Sainsbury’s (SBRY), down 1.3% to 227.9p and Ocado (OCDO), down 1.2% to 1,006.5p.

Yesterday in the City

Marks & Spencer (MKS) investors gave a firm thumbs down to its £1.5bn tie-up with Ocado, to launch a joint venture with the online delivery business that will cost M&S an initial £750m.

M&S shares dropped 12.5% to 265.4p on the news that to fund the deal it plans to slash its investor dividen and launch a rights issue.

Ocado was up 2.9% to 1,019p on top of its rises yesterday.

The overall FTSE 100 declined a further 0.6% yesterday back to 7,107.2pts as the pound continues to gain on international currencies on the expectations that a ‘no deal’ Brexit is closer to being avoided.

Risers yesterday included Premier Foods (PFD), up 3.6% to 38.5p, McColl’s (MCLS), up 2.3% to 57.9p, Hotel Chocolat (HOTC), up a further 1.6% after Tuesday’s gains to 320p, Stock Spirits (STCK), up 1.1% to 228.5p and AG Barr (BAG), up 1.1% to 762p.

Fallers included FeverTree (FEVR), down 3.4% to 2,638p, Bakkavor down 3.2% ahead of its annual results this morning to 3.2% and Just Eat (JE), down 2.1% to 724.6p.

A number of groups seemed to be hit by the strengthening pound, with Unilever (ULVR), down 3.1% to 3,988p, Coca-Cola HBC (CCH), down 2.9% to 2,543p, Associated British Foods (ABF) down 2.8% to 2,255p, C&C Group (CCR), down 2.3% to €3.04 and Glanbia (GLB) down 2.1% to €17.79.

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