Anheuser-Busch Better Positioned for Long-Term Growth
Baker added that perhaps the most encouraging development in the U.S. beer environment in the last two years has been the acceleration of growth in the consumer demand for beer.
30/11/07 Anheuser-Busch management reviewed the company's strategies to adapt to the changing beer industry environment and reaffirmed the company's expectation for earnings per share growth for the full year 2007 to exceed its 7 to 10 percent long-term objective, in a presentation given to investors and analysts in New York today.
"The last two years have been a period of considerable change in the beer industry and especially at Anheuser-Busch. Anheuser-Busch has taken significant steps to adjust to the changing beer consumer. We have substantially expanded our portfolio. To support this broadened portfolio, we have transformed our selling system to make it both more personal and high tech at the same time. We have also been making changes in marketing and media, with more significant changes planned for next year. Anheuser-Busch is clearly better positioned for long-term growth due to these changes than we were two years ago," W. Randolph Baker, vice president and chief financial officer of Anheuser-Busch Companies, told the investors.
Baker added that perhaps the most encouraging development in the U.S. beer environment in the last two years has been the acceleration of growth in the consumer demand for beer. Last year, beer industry shipment volume grew 2.1 percent, the best annual performance since 1990, and this year beer industry growth has continued to exceed expectations, up 1.8 percent October year-to-date.
In addition to the strong industry volume growth, the industry pricing environment has been favorable the past two years. Consistent with the pattern in recent years, Anheuser-Busch plans to implement price increases on the majority of its U.S. beer volume in early 2008, with increases in several states occurring in the fourth quarter 2007. As in the past, pricing initiatives will be tailored to selected markets, brands and packages.
The commodity cost environment has not been favorable. Mitigating the impact of commodity cost pressures is a high priority at Anheuser-Busch. The company has a strong record of consistently delivering significant annual productivity improvement savings, which management is confident will continue given plans and programs already in place.
Baker also provided highlights of the company's international beer business, which is an increasingly significant contributor to Anheuser-Busch's earnings growth. The majority of international beer profits are driven by the company's 50 percent investment in Grupo Modelo, the leading brewer in Mexico and the brewer of Corona, the leading U.S. import brand. The company is also well established in China, the largest and fastest growing beer market in the world, and particularly well-positioned in the country's most profitable beer segments. Budweiser is by far the leading super-premium brand in China and Anheuser-Busch has a 27 percent equity stake in Tsingtao, China's leading premium brewer.
Baker reviewed the company's long-term earnings model, which continues to target growth in the 7 to 10 percent range. Anheuser-Busch also consistently generates substantial cash flow, and cash returned to shareholders, including dividends and share repurchase, has increased significantly this year. The company increased its quarterly dividend by 11.9 percent in July. Share repurchasing has also been enhanced as a result of the company's new, more aggressive financial leverage policy. Management continues to expect to spend $2.7 billion on share repurchasing this year.
