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Anheuser-Busch Encouraged by 2006 Results and is Beginning to Capitalize on Opportunities for Future Growth
September 6, 2006
Results in 2006 have been encouraging and Anheuser-Busch is beginning to capitalize on opportunities for future growth, company executives told investors in a presentation given at the Prudential Consumer Conference today.
“Positive momentum has returned to the U.S. beer industry,” said August Busch IV, president of Anheuser-Busch, Inc. “Industry volume has seen gains in each of the last four quarters with total industry volume up 2.7 percent year-to-date through July.” Over this same period, Anheuser-Busch’s sales-to-wholesalers were up 3.2 percent vs. the same period last year. Through Labor Day, Anheuser-Busch sales-to-retailers were up 1.3 percent year-to-date and up 0.5 percent (selling day adjusted) in the third quarter. The domestic beer company’s healthy volume performance in 2006 has been led by its core Bud Light brand, which is up 5 percent year-to-date, and every Anheuser-Busch brand family has shown positive or improving trends so far this year.
“Going forward, we expect volume growth to continue, but at a more moderate rate due to challenging comparisons for the industry and A-B in the second half of 2006,” said Busch. “However, the pricing environment in the U.S. beer industry continues to be favorable.”
The domestic beer company’s revenue per barrel1/ was up approximately 1 percent in the second quarter and is expected to be up 2 percent in the third quarter. As previously announced, consistent with the pattern for 2006 pricing actions, the company expects to implement moderate price increases on the majority of volume early next year, with a few selective increases in the fourth quarter 2006.
“Anheuser-Busch is beginning to position itself to capitalize on opportunities for future growth by expanding into new categories and seeking to meet consumers where they are going, instead of following where they have been,” Busch also told the investors. Busch discussed a series of actions to expand the company’s portfolio to offer more variety to consumers, and more high- margin, high-growth products to its wholesalers. These initiatives include selected import and craft beers, some spirits-based products and rapidly growing non-alcohol energy drinks.
W. Randolph Baker, vice president and chief financial officer, provided highlights of the company’s financial performance in the first half of 2006 and reviewed the company’s long-term earnings model. “We are encouraged by our first half results,” said Baker. “Anheuser-Busch has reported improved sales and earnings performance this year with earnings per share, excluding one-time gains, up 9.5 percent2/ in the second quarter and up 7.4 percent2/ for the first six months.” Baker reaffirmed 2006 guidance for key performance drivers given at the company’s second quarter earnings teleconference and reiterated the company’s long-term earnings per share growth target in the 7 to 10 percent range.
Baker also highlighted the strong growth of the company’s international beer business. “Anheuser-Busch’s international beer segment is an increasingly important contributor to corporate earnings growth.”
The company’s 50 percent investment in Grupo Modelo is the vast majority of Anheuser-Busch’s international profits. Modelo’s contribution to Anheuser-Busch’s earnings growth is poised for another step up. Modelo recently announced a new joint venture for the national importation and marketing of Modelo’s Mexican beer portfolio in the United States. This joint venture will significantly enhance Modelo’s profits and, in turn, have a positive impact on Anheuser-Busch’s earnings per share beginning in 2007, as well as enhance earnings growth going forward.
Anheuser-Busch is also building an important platform for future volume and earnings growth in China, the largest and fastest-growing beer market in the world. Industry volume growth in China has averaged 7 percent per year over the last ten years. In the last five years, China alone has accounted for 45 percent of global beer volume growth. “With our wholly owned Budweiser and Harbin operations, plus our strategic partnership with Tsingtao, Anheuser-Busch is best positioned to capitalize on the substantial long-term growth opportunities in the Chinese beer market,” Baker concluded.
Other Matters
As previously announced, Anheuser-Busch’s Prudential Consumer Conference presentation is being broadcast live over the internet today beginning at 10:30 a.m. Eastern Time. A replay of the webcast will be available on the company’s Web site for approximately one week.
Notes
1. Domestic revenue per barrel is calculated as net sales generated by the company’s domestic beer operations on barrels of beer sold, determined on a U.S. GAAP basis, divided by the volume of beer shipped to U.S. wholesalers.
2. Reconciliation of Comparative Second Quarter
and First Six Months Earnings Per Share Results
This release contains forward-looking statements regarding the company’s expectations concerning its future operations, earnings and prospects. On the date the forward-looking statements are made, the statements represent the company’s expectations, but the company’s expectations concerning its future operations, earnings and prospects may change. The company’s expectations involve risks and uncertainties (both favorable and unfavorable) and are based on many assumptions that the company believes to be reasonable, but such assumptions may ultimately prove to be inaccurate or incomplete, in whole or in part. Accordingly, there can be no assurances that the company’s expectations and the forward-looking statements will be correct. Important factors that could cause actual results to differ (favorably or unfavorably) from the expectations stated in this release include, among others, changes in the pricing environment for the company’s products; changes in U.S. demand for malt beverage products, including changes in U.S. demand for other alcohol beverages; changes in consumer preference for the company’s malt beverage products; changes in the cost of marketing the company’s malt beverage products; regulatory or legislative changes, including changes in beer excise taxes at either the federal or state level and changes in income taxes; changes in the litigation to which the company is a party; changes in raw materials prices; changes in packaging materials costs; changes in energy costs; changes in the financial condition of the company's suppliers; changes in interest rates; changes in foreign currency exchange rates; unusual weather conditions that could impact beer consumption in the U.S.; changes in attendance and consumer spending patterns for the company’s theme park operations; changes in demand for aluminum beverage containers; changes in the company’s international beer business or in the beer business of the company’s international equity partners; changes in the economies of the countries in which the company’s international beer business or its international equity partners operate; changes in the company’s credit rating resulting from future acquisitions or divestitures; and the effect of stock market conditions on the company’s share repurchase program. Anheuser-Busch disclaims any obligation to update or revise any of these forward-looking statements. Additional risk factors concerning the company can be found in the company’s most recent Form 10-K.
September 6, 2006
Results in 2006 have been encouraging and Anheuser-Busch is beginning to capitalize on opportunities for future growth, company executives told investors in a presentation given at the Prudential Consumer Conference today.
“Positive momentum has returned to the U.S. beer industry,” said August Busch IV, president of Anheuser-Busch, Inc. “Industry volume has seen gains in each of the last four quarters with total industry volume up 2.7 percent year-to-date through July.” Over this same period, Anheuser-Busch’s sales-to-wholesalers were up 3.2 percent vs. the same period last year. Through Labor Day, Anheuser-Busch sales-to-retailers were up 1.3 percent year-to-date and up 0.5 percent (selling day adjusted) in the third quarter. The domestic beer company’s healthy volume performance in 2006 has been led by its core Bud Light brand, which is up 5 percent year-to-date, and every Anheuser-Busch brand family has shown positive or improving trends so far this year.
“Going forward, we expect volume growth to continue, but at a more moderate rate due to challenging comparisons for the industry and A-B in the second half of 2006,” said Busch. “However, the pricing environment in the U.S. beer industry continues to be favorable.”
The domestic beer company’s revenue per barrel1/ was up approximately 1 percent in the second quarter and is expected to be up 2 percent in the third quarter. As previously announced, consistent with the pattern for 2006 pricing actions, the company expects to implement moderate price increases on the majority of volume early next year, with a few selective increases in the fourth quarter 2006.
“Anheuser-Busch is beginning to position itself to capitalize on opportunities for future growth by expanding into new categories and seeking to meet consumers where they are going, instead of following where they have been,” Busch also told the investors. Busch discussed a series of actions to expand the company’s portfolio to offer more variety to consumers, and more high- margin, high-growth products to its wholesalers. These initiatives include selected import and craft beers, some spirits-based products and rapidly growing non-alcohol energy drinks.
W. Randolph Baker, vice president and chief financial officer, provided highlights of the company’s financial performance in the first half of 2006 and reviewed the company’s long-term earnings model. “We are encouraged by our first half results,” said Baker. “Anheuser-Busch has reported improved sales and earnings performance this year with earnings per share, excluding one-time gains, up 9.5 percent2/ in the second quarter and up 7.4 percent2/ for the first six months.” Baker reaffirmed 2006 guidance for key performance drivers given at the company’s second quarter earnings teleconference and reiterated the company’s long-term earnings per share growth target in the 7 to 10 percent range.
Baker also highlighted the strong growth of the company’s international beer business. “Anheuser-Busch’s international beer segment is an increasingly important contributor to corporate earnings growth.”
The company’s 50 percent investment in Grupo Modelo is the vast majority of Anheuser-Busch’s international profits. Modelo’s contribution to Anheuser-Busch’s earnings growth is poised for another step up. Modelo recently announced a new joint venture for the national importation and marketing of Modelo’s Mexican beer portfolio in the United States. This joint venture will significantly enhance Modelo’s profits and, in turn, have a positive impact on Anheuser-Busch’s earnings per share beginning in 2007, as well as enhance earnings growth going forward.
Anheuser-Busch is also building an important platform for future volume and earnings growth in China, the largest and fastest-growing beer market in the world. Industry volume growth in China has averaged 7 percent per year over the last ten years. In the last five years, China alone has accounted for 45 percent of global beer volume growth. “With our wholly owned Budweiser and Harbin operations, plus our strategic partnership with Tsingtao, Anheuser-Busch is best positioned to capitalize on the substantial long-term growth opportunities in the Chinese beer market,” Baker concluded.
Other Matters
As previously announced, Anheuser-Busch’s Prudential Consumer Conference presentation is being broadcast live over the internet today beginning at 10:30 a.m. Eastern Time. A replay of the webcast will be available on the company’s Web site for approximately one week.
Notes
1. Domestic revenue per barrel is calculated as net sales generated by the company’s domestic beer operations on barrels of beer sold, determined on a U.S. GAAP basis, divided by the volume of beer shipped to U.S. wholesalers.
2. Reconciliation of Comparative Second Quarter
and First Six Months Earnings Per Share Results
| Second Quarter | Earnings Per Share |
|||
| 2006 | ||||
| Reported | $0.82 | |||
| Texas Income Tax Legislation Benefit | (0.01) | |||
| Excluding One-Time Item | $0.81 | |||
| 2005 | ||||
| As Reported | $0.78 | |||
| FAS 123R Impact | (0.02) | |||
| Including FAS 123R | 0.76 | |||
| Chile Income Tax Settlement Benefit | (.009) | |||
| Ohio Income Tax Legislation Benefit | (.009) | |||
| Excluding One-Time Items | $0.74 | |||
| Percentage Change - 2006 vs. 2005 | ||||
| Including FAS 123R | 7.9% | |||
| Excluding One-Time Items | 9.5% | |||
| First Six Months | ||||
| 2006 | ||||
| Reported | $1.46 | |||
| Texas Income Tax Legislation Benefit | (0.01) | |||
| Excluding One-Time Item | $1.45 | |||
| 2005 | ||||
| As Reported | $1.43 | |||
| FAS 123R Impact | (.033) | |||
| Including FAS 123R | 1.39 | |||
| Gain on Sale of Spanish Theme Park | (.024) | |||
| Chile Income Tax Settlement Benefit | (.009) | |||
| Ohio Income Tax Legislation Benefit | (.009) | |||
| Excluding One-Time Items | $1.35 | |||
| Percentage Change - 2006 vs. 2005 | ||||
| Including FAS 123R | 5.0% | |||
| Excluding One-Time Items | 7.4% | |||
This release contains forward-looking statements regarding the company’s expectations concerning its future operations, earnings and prospects. On the date the forward-looking statements are made, the statements represent the company’s expectations, but the company’s expectations concerning its future operations, earnings and prospects may change. The company’s expectations involve risks and uncertainties (both favorable and unfavorable) and are based on many assumptions that the company believes to be reasonable, but such assumptions may ultimately prove to be inaccurate or incomplete, in whole or in part. Accordingly, there can be no assurances that the company’s expectations and the forward-looking statements will be correct. Important factors that could cause actual results to differ (favorably or unfavorably) from the expectations stated in this release include, among others, changes in the pricing environment for the company’s products; changes in U.S. demand for malt beverage products, including changes in U.S. demand for other alcohol beverages; changes in consumer preference for the company’s malt beverage products; changes in the cost of marketing the company’s malt beverage products; regulatory or legislative changes, including changes in beer excise taxes at either the federal or state level and changes in income taxes; changes in the litigation to which the company is a party; changes in raw materials prices; changes in packaging materials costs; changes in energy costs; changes in the financial condition of the company's suppliers; changes in interest rates; changes in foreign currency exchange rates; unusual weather conditions that could impact beer consumption in the U.S.; changes in attendance and consumer spending patterns for the company’s theme park operations; changes in demand for aluminum beverage containers; changes in the company’s international beer business or in the beer business of the company’s international equity partners; changes in the economies of the countries in which the company’s international beer business or its international equity partners operate; changes in the company’s credit rating resulting from future acquisitions or divestitures; and the effect of stock market conditions on the company’s share repurchase program. Anheuser-Busch disclaims any obligation to update or revise any of these forward-looking statements. Additional risk factors concerning the company can be found in the company’s most recent Form 10-K.