Financial Analysis of AB InBev

The Anhe make use ofr-Busch InBev Company (AB InBev) was established byout the years through mergers and acquisitions. AB InBev is the largest brewery in Jupille, Belgium. They operate in atomic number 7 the States, Latin America, South America, Europe, and Asia Pacific. receivable(p) to political upheavals in Germany and Bohemia in 1848, many German immigrants settled in St. Louis, Missouri (Anheuser-Busch, 2011). Eberhard Anheuser was a trained soap maker and became part possessor of the Bavarian Brewery. By 1860, he bought the investors sh ars and the brewery name was changed to E. Anheuser & Co. Adolphus Busch married Lilly Anheuser, Eberhards girlfriend and later Adolphus purchased half ownership of Anheusers brewery, becoming a associate (Anheuser-Busch, 2011). Due to Buschs innovations, the brewery became the first to use pasteurization, everyowing the beer to be shipped huge distances without spoiling. By the early 1880s, the brewer introduced artificial refrigeratio n, rail-side icehouses, and refrigerated railcars. These innovations exclusivelyowed the alliance to grow and dissipate their beer across the country.To market the beers Busch used traditional merchandising methods however, Buschs methods were to a greater extent than organized and deliberate than his competitors. Busch pi 1ered the use of giveaways and premiums, and used his brewery as a furnishplace for the cosmos to visit (Anheuser-Busch, 2011). The brewery social club was renamed Anheuser-Busch Brewing Association in 1879 to recognize Adolphus efforts. The beau monde became one of the nations leading breweries in 1901 when it broke the one million barrels of beer gross revenue mark (Anheuser-Busch, 2011).Over the years, the community grew through acquisitions and mergers and became AB InBev. In 1989, a group of investors purchased Brahma, the number two beer in brazil nut. In 1999, the brand took over the number one spot and was feature with its chief competitor to for m AmBev. AmBev expanded throughout South America and became the third-largest brewer in the world. In 2004, Interbrew, the European beer accompany, acquired a majority transfix in AmBev, which created InBev. In 2008, InBev purchased Anheuser-Busch get outing in the new company AB InBev (Allen & Zook, 2012).Anheuser-Busch (AB InBev) The in public traded company (Euronext ABI) is establish in Leuven, Belgium with Ameri kitty Depositary Receipts on the youthful York Stock Exchange (NYSE BUD) (Anheuser-Busch InBev AB InBev, 2011) and is non only the leading planetary brewer, notwithstanding is one of the worlds top five consumer product companies. AB InBevs portfolio contains over 200 brands of beer with fourteen brands that generate over $1 billion per year in revenue. The brewer invests in their greatest appendage potential brands such as developweiser with 45% of sales originating in northward America.The company owns 50 percent justice concern in Mexicos leading brewer a nd owner of the Corona brand, the subsidiary Grupo Modelo. With their approximate 116,000 employees based in twenty-three countries worldwide, AB InBev is geographically diversified, along with a equilibrium exposure to developing and developed markets, the company has a completive edge. AB InBev is a multinational beverage company and is the largest brewer, with al just about 25 percent ball-shaped market share. They are the third largest FMCG company by firm judge (AB InBev, 2011).AB InBev was chosen for a financial analysis due to its length of service and innovated ideas and selling. It is hoped that AB InBevs financial records result show that their innovated methods will show a continuous financial growth. The Annual narration For this analysis, AB InBevs 2011 annual get over is used and it compares 2010 and 2011. The audit was performed by Pricewaterhouse Coopers. The report is in millions and AB InBev saw a $2,197m in service gain from 2010 to 2011 and a $1,114m in coin flow from operating activities in the beginning changes in work capital and use of provision.The change in working capital was $1,183m resulting in an sum up of $2,581m of property flow from operating activities. There was a disconfirming improver in the investing and financing activities, $185m and $2,239m respectively. In 2010, AB InBev had a net append in money and immediate payment equivalents of $602m and $759m in 2011. Overall, in 2011 AB InBev realized $39 billion revenue (AB InBev, 2011). The Balance potfulvas When assessing the financial report, it may be difficult to see positive revenue. In order to understand, one must know how interpret the financial rumor as a whole.The counterpoise sheet provides information about AB InBevs assets, liabilities, and stockholders legality. Assets are things that a company canister sell or use. These items embroil physical property, inventory, equipment, etc. Intangibles are overly assets things that cannot be touch ed, but nevertheless realize value, i. e. patents and trademarks, investments the company makes. And of course property is the main asset. Liabilities are amounts that the company owes to new(prenominal)s. These amounts can include a bring secured to launch a new product, rent for use of a factory, or gold owed to a supplier, etc.Liabilities also include future obligations, i. e. goods or services promised to be provided in the future. Shareholder equity (or capital or net worth) is the money that would be left(p) if a company change all of its assets and paid off all their liabilities. Any money left over belongs to the owners (or shareholders) of the company. The balance sheets equation is Assets = Liabilities + Shareholders equity (Garrison, Noreen, & Brewer, 2010). The balance sheet is set up with the assets listed and tallied on the left side, while liabilities and shareholders equity on the right.The assets are usually listed in order of how quickly they can be shifted into real cash. Current assets are things that the company plans to convert to cash within one year, i. e. inventory. Noncurrent assets are things that are judge to be converted to cash longer than a year. Noncurrent assets include fixed assets (not available for sale, i. e. office furniture). Liabilities are usually listed according to their due dates. Liabilities are either current or long-term. Current liabilities are debts that the company expects to pay off within a year on the other hand, long-term liabilities are due in more than a year.Shareholders equity (SE) is the amount invested by the owners. SE is calculated by subtracting the companys earnings or losses from the owners investment in the companys stock (Garrison, Noreen, & Brewer, 2010). In assessing AB InBevs balance sheet for 2011, the company had $39,046 million in revenues, a 4. 6% addition, and a gross profit of $22,412 million. It is stated in the annual report that a selective price increase was taken in the last depict in anticipation of high commodity costs. Cost of Sales (CoS) increase by 1. 6%.This increase was due according to AB InBev in part to lower aluminum can costs in Latin America and procurement savings and implementation of their best practice programs in North America. The total operating expenses change magnitude by 3. 7%. This was partly due to distribution expenses increasing by 9. 2%. Brazil had high transportation costs, while Latin America South saw higher labor costs and higher transport tariffs in Ukraine and Russia. Sales and marketing expenses increased by 4. 1% because, specifically in North America, more investments in brand runner savings in non-working money. Administrative expenses increased by 0. % due to fixed cost savings in the unite States offset by salary increases and expansion costs in china and Brazil. Other operating income was $694 million compared to $64 million in 2010 in the main because of tax incentives in China and Brazil (AB InBe v, 2011). The Income Statement An income teaching shows how much revenue a company earned and the costs associated with earning utter revenue. The scum bag line of an income statement normally shows the companys net losses or earning. This statement tells how much the company has made or confounded over the accountancy period, usually for a year or a portion thereof.Income statements reports earnings per share (EPS). (To calculate EPS, the total net income is split up by the number of outstanding shares of the company). An income statement also shows how much shareholders would nonplus if the company distributed all of the net earnings for the accounting period however, most companies reinvest their earnings (Garrison, Noreen, & Brewer, 2010). Income statements begin with the total amount of revenue made during an accounting period and then deduct certain costs and operating expenses associated with earning said revenue. The bottom line tells how much the ompany earned or l ost during the period. The set about is the gross revenue (or sales). The next line is the amount the company does not expect to collect (referred to as allowances), i. e. discounts, or returns. After deducting these allowances from the gross revenues (or sales), the result is net revenues. The next lines are operating expenses. Although these expenses can be listed in various order, the line after net revenues is usually costs of sales. be of sales is the amount the company has spent producing the goods or services change during the accounting period.Subtracting cost of sales from net revenues gives a subtotal of gross profit (also known as gross margin) (Garrison, Noreen, & Brewer, 2010). The operating expenses are listed next on the income statement. These expenses support a companys operations, i. e. salaries, marketing, etc. Because operating expenses cannot be linked to the production of products or services being sell, they are assorted from costs of sales (Garrison, Nore en, & Brewer, 2010). Depreciation is also deducted. Depreciation is the amount of fag out and tear on assets (machinery, tools, etc. ) that are used over long term.This amount is spread over the periods they are used and is called dispraise or amortization. After this deduction from the gross profit, the income from operations is arrived. This amount is before interest and income tax expenses (Garrison, Noreen, & Brewer, 2010). The next piece allows companies to account for interest income and interest expense. fire income is earned from interest-bearing savings accounts, money market funds, etc. sake expenses are monies paid in interest on loans, etc. just about companies show these separately and some combine the two.The income and expenses are totaled and then deducted from the operating profit to arrive at operating profit before income tax (EBIT). Finally, income tax is subtracted and the bottom line of net profit or net loss (also known as net income, net earnings, or net operating income) is calculated (Garrison, Noreen, & Brewer, 2010). On AB InBevs income statement, sales are the same as on the balance sheet. (AB InBev, 2011). In North America, EBITDA increased 1. 5%, $6. 573 million with a margin expansion increase up to 42. 9%, driven by growth in budget items cost reductions and gross profit.In the combined statement (the gathering of all AB InBevs companies), the EBIT for 2011 is $12,607 million and an EBITDA of $15,357 million (AB InBev, 2011). Cash Flow Statements opus a balance sheet is a snapshot and the income statement shows if the company made a profit or lost money, a cash flow statement shows if the company generated cash. Cash flow statements shows the influx and outflows of the companys cash. This statement is very important because it proves that the company has enough money to pay expenses, purchase assets, and stay competitively profitable.Whereas other financial statements shows an haughty dollar amount at a particular time, a cash flow statement show changes during the accounting period. The cash flow statement uses the information from both balance sheet and income statement. Cash flow statements are divided into three major sections operating activities, investing activities, and financing activities. (Garrison, Noreen, & Brewer, 2010). AB InBevs financial report consolidates the activities, followed by a breakdown of the activities including explanations.operating(a) activities rose from $9,905million to $12,486 million investing activities increased from a negative $2,546m in 2010 to negative $2,731m in 2011 and financing activities rose from $6,757m to $8,996m in 2011. However, the net increase in cash and cash equivalents increased from $602m to $759m (AB InBev, 2011). Operating activities. The first section of a cash flow statement analyzes inflow from net income or loses. This section usually reconciles the net income (taken from the income statement) to the actual cash the company original f rom and used in its operating activities.This process adjusts net income for any non-cash items, i. e. adding depreciation expenses back, and for any cash that was a inception or a use provided by other operating assets and liabilities (Garrison, Noreen, & Brewer, 2010). AB InBevs financial report of cash flows shows an increase in operating activities. This increase is due to a higher profit and strong contribution from changes in the working capital. The increase in working capital is the result of on-going trade initiatives furthermore, there is an increase in trade payables that are linked to higher capital expenditures.These expenditures have longer payment terms (AB InBev, 2011). Investing activities. Investing activities shows the inflow from all investing activities. These activities usually include purchases or sales of long-term assets, i. e. property, plant, and equipment (PPE) as well as investment securities. If a company buys machinery, this activity would be listed a s a cash outflow because cash was used. However, if the company sold some investments from their portfolio the proceeds would be an inflow from investing activities because it is a source of cash (Garrison, Noreen, & Brewer, 2010).AB InBevs investing activities were $2,731m in 2011, compared to 2010 which was $2,546m. This increase is by higher capital expenditures mainly in Brazil and China. To partially offset this increase, the company sold short-term debt securities. The company invested in 2010 to facilitate liquid and capital preservation in Brazil. Net capital expenditures were $3,256m in 2011 and $2,123 in 2010. This increase is primarily linked to investments for expansion in China and Brazil in order to meet demands in the growing market.Approximately 57% was used to improve production facilities while 33% was used for logistics and commercial investments. Ten percent was used for purchase of hardware and software and astir(p) administration (AB InBev, 2011). Financing a ctivities. The last section is financing activities. This part of the cash flow statement shows the typical sources of inflow, including cash raised by selling stocks or bonds and borrowing funds from a bank (Garrison, Noreen, & Brewer, 2010). Cash inflow from financing activities was $8,996m in 2011, compared to 2010s $6,757m.The 2011 amount reflects higher dividend payouts, net repayments, and settlements of derivatives that were not part of a hedge. AB InBev could borrow enough to meet its fluidity needs the companys policy is to rely on cash flows from operating activities to fund its continuing operations (AB InBev, 2011). Analysis of AB InBevs Financials According to the 2011 annual report, Anheuser-Busch InBev saw a year of solid doing and progress. AB InBev experienced growth, expanded their EBITDA margin, grew EPS, and made strides in de-leveraging the balance sheet.AB InBev experienced a strong growth from their three well-known global brands Budweiser, Stella Artois, and Becks. These brands were up by 3. 1%. Stella Artois volumes increased by 5. 9%, with a 24% surge in sales in the United States, 13% in Argentina, and 200% in Brazil. The company continues to expand and grow in China and Brazil. The company raised its dividends to 1. 20 euros per share, a 50 % increase. These results were achieved notwithstanding weak consumer confidence in several markets and increases in commodity prices. go about with adverse conditions, our people did what they do best.They took ownership of the situation, focused on what they can impact, and did not let short-term factors distract from our long-term goals of connecting with consumers, driving shareholder value, and working toward our dream to be the Best Beer Company in a Better World (AB InBev, 2011). The United States shows signs of an economic recovery. An increase in US profits are supported by the companys new NFL sponsorship. Felipe Dutra, AB InBevs CFO said the increase could also have something to do with the unseasonably mild weather (AB InBev, 2011). The newly launched Bud Light Lime and Bud Light Platinum performed well.Dutra said We believe we have the right brands to ferment that opportunity, before, during and after the Olympic games. Budweiser has also extended sponsorship of the soccer World instill through 2018. AB InBev will continue to rely heavily on their strategic brands (AB InBev, 2011). Conclusion A fundamental part of their culture is never being entirely satisfied with their results we always challenge ourselves to dream larger and achieve more. . . (AB InBev, 2011). With continued global growth and expansion and early payoffs of debt, AB InBev will continue to see profits. The companys innovated thinking will carry it into the millennium.ReferencesAllen, J., & Zook, C. (2012, May 4). The strategic principles of repeatability How nonnegotiable fuel growth. How can a company sustain profitable growth? brief. Retrieved fromhttp//www.bain.com/publications/arti cles/the-strategic-preincipels-of-repeatability.aspx Anheuser-Busch Dedication to our craft. (2011). http//anheuser-busch.com/index.php/our-heritage/history/ Anheuser-Busch InBev. (2011). ABInBev Annual Report 2011 Annual report. Brouwerijplein, Leuven AB InBev. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2010). Managerial Accounting (13th ed.). New York, NY McGraw-Hill/Irwin.