AB InBev’s beer volumes increased this quarter (JSE: ANH)

South America clearly hasn’t heard about the reduced consumption trend

Alcohol sales are a difficult thing to predict.

The recent narrative has been focused on the reduction in consumption by health-conscious adults, especially Gen Zs who seem to be drinking far less than prior generations. It’s not about cutting alcohol entirely – it’s about having three drinks instead of four. If everyone did that, consumption would drop by 25%!

I’m not exactly sure what has driven the latest uptick in beer volumes. It could be a low base effect. It could also just be a more stressful world, with people seeking out fun experiences to offset the constant barrage of negative news. Whatever the cause, AB InBev’s beer volumes increased by 1.2% in the latest quarter – and that’s a big surprise.

The market was caught off-guard by this news, with the share price up 8.3%.

But if we dig deeper, was this really because of alcohol consumption, or just the social pressure of wanting to drink something other than a soft drink? No-alcohol beer volumes were up 27%. I’m not a subscriber to the “all of the calories, none of the fun” camp, but each to their own.

There are also low calorie and even gluten free options these days. I won’t mention this to my dad – it’s not worth the trauma it will cause him.

Corona is still winning in the post-pandemic era, demonstrating that one of the best marketing tricks possible is for a global flu to be named after your product. Corona achieved 16% growth outside of its home market. Mexico, Corona’s home market, is still a very important source of growth for AB InBev. Colombia and Brazil reported record beer volumes, so South America doesn’t seem to be showing much interest in reducing their consumption. In stark contrast, it’s the “Beyond Beer” portfolio that was a meaningful contributor in the United States. Regional tastes make a big difference to performance!

Another important source of growth is the distribution capability. Their marketplace gross merchandise value jumped by 55% – and this is for sales of third-party products. Overall, the BEES marketplace was up 15%. This makes it a great driver of revenue and an important source of risk mitigation in terms of reliance on other ways to distribute product.

The increase in volumes, combined with price hikes, took revenue 5.8% higher in constant currency terms. It was up a delightful 12.0% as reported, with currency movements being highly favourable in this period.

Normalised EBITDA is a slightly less encouraging story, up by 5.3%. Normalised EBITDA margin contracted by 15 basis points to 35.6%.

By the time you reach the bottom of the income statement, you’ll find that constant currency earnings per share increased by 8.8%. There’s clearly some leverage in this thing below the EBITDA line.

There’s little doubt that the ESG consultants have been all over AB InBev, with terms like Balanced Choices and Beyond Beer. It sounds a lot like British American Tobacco (JSE: BTI). But what investors actually care about is the numbers – and with numbers like these, the share price will find support in the market.

And in case you’re wondering, South Africa achieved record high volumes, with Corona up in the mid-twenties. Premium beer brands are showing the strongest growth here, with Carling Black Label only achieving low single digit revenue growth.

What has been the recent trend in the consumption of alcohol by you and your peer group?

Kinetic Development Group is now the 51% holder of MC Mining (JSE: MCZ)

The second tranche of the subscription has closed

MC Mining has one potentially very good asset (the Makhado Project) and some scrappy stuff that is perhaps best described as being in damage control mode.

To make the Makhado Project a reality, they attracted Kinetic Development Group (KDG) as a major investor. This is a big deal and a strong show of faith in South Africa by a foreign investor.

With the latest tranche now completed, KDG has a 51% stake in MC Mining. A substantial $90 million has flowed into MC Mining over the course of the share subscription agreement.

MC Mining has also reminded the market that KDG brings plenty of operational and technical expertise to the table as well, being a leading global coal operator listed in Hong Kong. They have deep relationships in China, which will be helpful during the construction and commissioning phase.

KDG has appointed two directors to the board of MC Mining, so these aren’t just empty promises about contributing time and expertise in addition to the capital.

Thanks to the funding received from KDG, the Makhado Project is in advanced construction phase and is making progress towards commissioning and joint trial operations. They are targeting 800,000 tonnes per annum in hard coking coal and 700,000 tonnes per annum in thermal coal.

The share price closed 8.7% higher on the day. Although the market knew that the money was coming, there’s nothing quite like confirmation of money in the bank.

Results of previous poll:

Nibbles:

• Director dealings:
  • The COO of Nedbank (JSE: NED) sold share awards worth R10.4 million. These relate to older schemes and the announcement doesn’t specify that the sale is for tax, so I assume that it isn’t.

• Here’s some good news for shareholders in Aspen (JSE: APN): the company has received approval from the South African Health Products Regulatory Authority (SAHPRA) to release the first commercial batches of human insulin manufactured for sale in South Africa. The facility in Gqeberha is manufacturing this insulin. Aspen close 5.6% higher on the day.