This is a summary of the second quarter fiscal 2008 earnings call conducted by Anheuser-Busch Companies Inc. (BUD) on July 23, 2008.
Management:
VP and CFO: W. Randolph Baker
VP of Investor Relations: Dave Sauehoff
Controller: John Kelly
Key Investor Issues:
- Second-quarter profit rose nearly 2% to $689 million, or 95 cents a share, from $677 million, or 88 cents a share, a year ago.
- Net sales rose 4.6% to $4.72 billion, as the company sold 43.1 million barrels of beer.
- The company raised its quarterly dividend 12% to 37 cents per share.
- Beer shipments to wholesalers increased 0.5% and sales from wholesalers to retailers rose 0.4% from a year ago.
Second Quarter Highlights:
On July 14, Anheuser-Busch and InBev announced an agreement for InBev to acquire Anheuser-Busch and create the true global brewing leader, Anheuser-Busch InBev. Until the transaction closes, Anheuser-Busch continues to operate as a public company on a business-as-usual basis.
Anheuser-Busch had a strong second quarter with earnings per share up 9.2% ahead of expectations.
Sales-to-retailer trends have improved significantly with especially strong results over the July 4 holiday. The series of initiatives taken in the last two years to better position the company for long-term growth are gaining traction with consumers. Innovative new products, including Bud Light Lime, Bud Chelada and LandShark Lager are making important contributions to both volume and revenue per barrel growth.
The pricing environment this summer, including the important July 4 holiday, has been favorable.
Anheuser-Busch is proceeding with plans to implement pricing actions this fall. Commodity cost inflation continues, but Anheuser-Busch remains optimistic about its ability to mitigate these cost pressures through the expanded and accelerated Blue Ocean program. Also, today, the Anheuser-Busch Board of Directors approved a 12.1% increase in the company''s quarterly dividend from $0.33 to $0.37 per share.
Consolidated net sales increased 4.6%from a year ago.
- Net sales for the U.S. beer company grew 4.5% from a year ago.
- International segment sales rose 17%.
- Consolidated cost of sales increased 4.9%.
- Cost of goods sold per barrel for the U.S. beer company increased 3.8%.
U.S. beer company gross margins declined 50 basis points due to rising commodity costs and consolidated gross margins were down 20 basis points.
- Marketing, distribution and administrative expenses were up 4.9% from a year ago.
- Equity income declined 14.2%.
- Consolidated net income increased 3.3%.
- Earnings per share were $0.95, up 9.2%.
For the first six months of the year, consolidated net sales increased 5.3%.
- Net income grew 1.3% and earnings per share were up 7.1% from a year ago.
- Effective tax rate in the second quarter was 36%, a 350 basis point decline versus last year due to lower taxes on foreign earnings and tax benefits related to the exercise of employee incentive stock options.
During the quarter, Anheuser-Busch repurchased 4.6 million shares and for the six months, share repurchase spending was $695 million or over 13 million shares.
- The share repurchase program has now been suspended due to the agreement with InBev.
- Wholesaler sales-to-retailers increased 4/10 of 1% in the second quarter, with A-B produced brands up 3/10 of 1%.
Year-to-date, total STRs declined slightly while Anheuser-Busch produced brands declined 1/2 of 1%.
STR results in April were up low single digits. However, STRs in May and June were down slightly, due to unfavorable weather in key markets and the significant impact of the day and week timing of the July 4th holiday.
Sales-to-retailers for the second quarter, plus the first week of July, which eliminates the July 4th timing distortion, increased 1.9% with Anheuser-Busch produced brands increasing 1.7% and for the two weeks ending July 5th, Anheuser-Busch delivered the best two-week volume performance in the company''s history with total STRs up 7.6% and Anheuser-Busch produced brands increasing 7.5%.
