E-Malt.com News article: 3029

USA: Anheuser-Busch Cos. has recently posted record sales, earnings for second quarter and first six months of 2004. With strong growth from all of its major operating segments, Anheuser-Busch Cos., Inc. achieved record sales and earnings for the second quarter and first six months of 2004, it was announced on July 28, 2004 by Patrick Stokes, president and chief executive officer of the company. Consolidated net sales increased 6.4 percent in the second quarter, while earnings per share increased 10.7 percent. Net sales and earnings per share increased 6.2 percent and 13.6 percent, respectively, for the first six months.

Results for the first six months of 2004 benefited from a $19.5 million pretax gain ($.015 per share) from the sale of commodity hedges. This gain is reported in other income/(expense) on the consolidated income statement and as such does not impact gross profit or operating income. Excluding this gain, earnings per share for the first six months increased 12.5 percent vs. 2003.

"Anheuser-Busch had an excellent second quarter and continued its track record of delivering consistent and dependable earnings growth. The company has now achieved 23 consecutive quarters of double-digit earnings per share growth. We remain confident in our ability to consistently achieve our double-digit annual earnings per share growth objective over the long-term, with an 11.7 1 percent earnings per share growth target for 2004, excluding the benefit of the commodity hedge gain," said Stokes.

Strong growth in domestic revenue per barrel 2 continues to drive enhancement in profit margins. Gross and operating margins increased 30 basis points to 41.2 percent and 24.7 percent, respectively, for the first six months of 2004. Second quarter gross margin was level at 41.9 percent while operating margin increased 10 basis points, to 25.5 percent. For the second quarter, domestic beer gross margin increased 30 basis points and was essentially offset by lower margins for the commodity-based packaging segment. Return on capital employed 3 increased 70 basis points over the past 12 months to 18.6 percent.

Domestic revenue per barrel grew 2.5 percent in the second quarter, and 2.8 percent for the first six months of 2004 vs. the same periods in 2003. This growth reflects the continuing favorable pricing environment and continued consumer trading up to the super premium Michelob family.

Consistent with the company's practice of implementing moderate annual price increases in two phases, Anheuser-Busch plans to initiate selected pricing actions in the fourth quarter 2004. The revenue enhancement initiatives will again be tailored to specific markets, brands and packages.

Domestic beer sales-to-wholesalers increased 1.9 percent for the second quarter of 2004 vs. the second quarter 2003 and were up 1.4 percent for the first six months of 2004. Wholesaler sales-to-retailers were up 1.2 percent in the second quarter and up 1.8 percent for the first six months, vs. similar 2003 periods. These results were led by strong growth of the company's Michelob ULTRA and Bud Light brands.

The company's domestic market share (excluding exports) for the first six months of 2004 was 49.8 percent, level with 2003 market share. Domestic market share is based on estimated U.S. beer industry sales using information provided by the Beer Institute and the U.S. Department of Commerce.

International volume, consisting of Anheuser-Busch brands produced overseas by company-owned breweries and under license and contract-brewing agreements, plus exports from the company's U.S. breweries to markets around the world, increased 6.6 percent for the second quarter and 6.4 percent for the first six months of 2004. Worldwide Anheuser-Busch beer sales volume for the second quarter and first six months of 2004 rose 2.2 percent and 1.7 percent, to 29.6 million and 56.6 million barrels respectively, vs. 2003. Worldwide beer volume is comprised of domestic volume and international volume. International equity partner brands volume, representing the company's share of its foreign equity partners' volume reported on a one-month lag, increased 2.3 percent for the second quarter and 2.1 percent for the first six months of 2004 vs. 2003, contributing to the company's 2.2 percent and 1.8 percent increase in total brands volume for the same periods.

A discussion of financial highlights for the second quarter 2004 follows: Net sales increased 6.4 percent compared to the second quarter 2003, driven primarily by a 5.1 percent increase in domestic beer segment net sales (due to higher revenue per barrel and higher volume) along with higher sales in all major operating segments.

Income before income taxes for the second quarter increased 7.6 percent vs. 2003, reflecting improved results for all of the company's operating segments.

Pretax income for the domestic beer segment had especially strong growth, up 8.7 percent for the quarter, reflecting higher revenue per barrel due to the favorable pricing environment and higher beer sales volume.

International beer segment pretax income improved $5 million or 20 percent in the second quarter vs. 2003 primarily due to volume and profit growth in China and Canada.

Packaging segment pretax profits were up 4 percent in the second quarter 2004, primarily due to higher soft drink can pricing and improved profits from the company's aluminum recycling operation.

Entertainment segment pretax profits increased 24 percent compared to the second quarter 2003, primarily due to increased attendance and admissions pricing.

Equity income was up slightly in the second quarter 2004 vs. 2003. Results in 2003 included a $5.5 million after tax gain representing Anheuser-Busch's equity share of CCU earnings from the sale of a brewery in Croatia. Excluding this gain, equity income in the second quarter 2004 increased 5.8 percent 4 vs. 2003.

Net income increased 6.5 percent compared to second quarter 2003. Diluted earnings per share were $.83, an increase of 10.7 percent, compared to 2003.

Net sales increased 6.2 percent compared to the first six months of 2003, driven primarily by a 4.7 percent increase in domestic beer segment net sales (due to higher revenue per barrel and higher volume) along with higher sales in all major operating segments.

Income before income taxes increased 9.8 percent vs. the first six months of 2003, reflecting improved results for all of the company's operating segments.

Income before income taxes for the first six months of 2004 includes a $19.5 million pretax gain ($.015 per share) from the first quarter sale of commodity hedges that had been in place for future years. These hedges were originally placed using estimates for costs to be contained in the renewal of a supply contract. During the first quarter, the company lowered its cost estimates, resulting in significant hedge ineffectiveness in compliance with FAS 133. Due to the hedge ineffectiveness, the company sold the hedges and realized the $19.5 million pretax gain, which is included as a corporate item for business segment reporting purposes.

Pretax income for the domestic beer segment was up 8.3 percent for the first six months, reflecting higher revenue per barrel and higher beer sales volume. Domestic beer pretax income for the first six months includes a $19.1 million pretax gain related to the sale of two beer wholesaler partnerships. For consolidation reporting purposes, the gain is reported in other income/(expense), net.

International beer segment pretax income improved 17 percent in the first six months vs. 2003 primarily due to volume and profit growth in China and Canada.

Packaging segment pretax profits were up 6 percent for the first six months 2004 vs. 2003. This increase is primarily due to higher soft drink can volume and pricing and improved results from the company's aluminum recycling operation.

Entertainment segment pretax income increased 56 percent compared to the first six months of 2003, primarily due to a significant increase in attendance and higher admissions pricing.

Equity income increased $15 million for the first six months 2004 vs. 2003, primarily reflecting the benefit of price increases implemented by Grupo Modelo coupled with volume growth.

Net income increased 9.5 percent over the first six months of 2003. Diluted earnings per share were $1.50, an increase of 13.6 percent, compared to the prior year. Earnings per share excluding the gain on commodity hedges increased 12.5 percent 5 . Earnings per share continue to benefit from the company's ongoing share repurchase program. The company repurchased nearly 5 million shares in the quarter and over 15 million shares through the first six months of 2004.

During the second quarter Anheuser-Busch acquired an initial 36 percent equity stake and launched a tender offer for the remaining shares in Harbin Brewery Group, a major brewer in China. By the end of the quarter, the company had acquired an additional 29 percent of Harbin, increasing its total ownership to approximately 65 percent. The company paid $408.4 million for its 65 percent investment in Harbin, which is included in its consolidated statement of cash flows and as a single line item in the consolidated balance sheet as of June 30, 2004. To date, Anheuser-Busch has acquired virtually all of Harbin's shares for a total investment of approximately $692 million. The Harbin investment will result in a comparable reduction in the company's 2004 share repurchase spendings.

Anheuser-Busch's second quarter earnings do not include results for Harbin. Beginning in the third quarter, upon completion of purchase accounting valuations, the company will fully consolidate its Harbin investment within its financial statements. The company anticipates reporting Harbin results on a one-month lag basis. For 2004, the Harbin acquisition is estimated to dilute earnings per share by approximately $.01.

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 from the company's breweries to U.S. wholesalers.

Return on capital employed is computed as 12 months of net income before after-tax net interest (interest expense less interest capitalized) divided by average net investment. Net investment is defined as total assets less non-debt current liabilities. For 2004, after-tax net interest expense was $237.8 million, calculated as pretax net interest expense of $383.6 million less income taxes applied using a 38 percent tax rate. For 2003, after-tax net interest expense was $228.9 million, calculated as pretax net interest expense of $369.2 million less income taxes applied using a 38 percent tax rate.


31 July, 2004