'Financial Analysis of AB InBev\r'

'The Anheuser-Busch InBev high society (AB InBev) was established by dint ofout the social classs through mergers and acquisitions. AB InBev is the largest brewery in Jupille, Belgium. They operate in conglutination America, Latin America, South America, Europe, and Asia Pacific. Due to g everywherenmental upheavals in Germany and Bohemia in 1848, many German immigrants colonised in St. Louis, Missouri (â€Å"Anheuser-Busch,” 2011). Eberhard Anheuser was a trained cleanse maker and became discriminate possessor of the Bavarian Brewery. By 1860, he bought the investors’ sh bes and the brewery name was changed to E. Anheuser & group A; Co. Adolphus Busch married Lilly Anheuser, Eberhard’s daughter and later Adolphus purchased half possession of Anheuser’s brewery, becoming a partner (â€Å"Anheuser-Busch,” 2011). Due to Busch’s innovations, the brewery became the first to use pasteurization, everyowing the beer to be shipped broad distances without spoiling. By the early 1880’s, the brewer introduced artificial refrigeration, rail-side icehouses, and refrigerated railcars. These innovations every last(predicate)owed the association to grow and distribute their beer across the country.\r\nTo market the beers Busch employ traditional selling methods; however, Busch’s methods were more(prenominal) organized and deliberate than his competitors. Busch â€Å"pi wholenessered the use of giveaways and premiums, and utilise his brewery as a showplace for the public to visit” (â€Å"Anheuser-Busch,” 2011). The brewery come with was renamed Anheuser-Busch Brewing tie-up in 1879 to recognize Adolphus’ efforts. The order became iodin of the state’s trail breweries in 1901 when it broke the one trillion barrels of beer levyation revenue mark (â€Å"Anheuser-Busch,” 2011).\r\n everyplace the course of studys, the bon ton grew through acquisitions and mergers and became AB InBev. In 1989, a group of investors purchased Brahma, the number two beer in Brazil. In 1999, the brand took over the number one screw and was assentd with its chief competitor to form AmBev. AmBev die hard throughout South America and became the third-largest brewer in the world. In 2004, Interbrew, the European beer c totallyer, acquired a majority lay on the decipher in AmBev, which created InBev. In 2008, InBev purchased Anheuser-Busch; consequenting in the new federation AB InBev (Allen & adenosine monophosphate; Zook, 2012).\r\nAnheuser-Busch (AB InBev) The publicly traded company (Euro neighboring: ABI) is base in â€Å"Leuven, Belgium with Ameri raft Depositary Receipts on the clean York Stock Exchange (NYSE: BUD)” (Anheuser-Busch InBev [AB InBev], 2011) and is not only the leading world(a) brewer, but is one of the world’s top five consumer product companies. AB InBev’s 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 festering potential brands such(prenominal) as developweiser with 45% of gross sales originating in North America.\r\nThe company owns 50 percent equity occupy in Mexico’s leading brewer and owner of the Corona brand, the subsidiary Grupo Modelo. With their approximate 116,000 employees based in twenty- triple countries worldwide, AB InBev is geographically diversified, along with a remainderd exposure to developing and developed markets, the company has a completive edge. AB InBev is a multinational drink company and is the largest brewer, with almost 25 percent global market sh atomic number 18. They argon the third largest FMCG company by firm value (AB InBev, 2011).\r\nAB InBev was chosen for a mo interlockary analysis out-of-pocket to its longevity and innovated ideas and marketing. It is hoped that AB InBev’s financial records leave show that their innovated m ethods will show a continuous financial growth. The yearly Report For this analysis, AB InBev’s 2011 annual topic is used and it comp bes 2010 and 2011. The audit was performed by Pricewaterhouse Coopers. The report is in millions and AB InBev precept a $2,197m in avail gain from 2010 to 2011 and a $1,114m in entrepots fuse rate from operational activities ahead changes in working groovy and use of provision.\r\nThe change in working expectant was $1,183m resulting in an cast up of $2,581m of currency shine from direct activities. There was a negative emergence in the investing and financing activities, $185m and $2,239m respectively. In 2010, AB InBev had a discharge increase in cash and cash equivalents of $602m and $759m in 2011. Overall, in 2011 AB InBev realized $39 billion revenue (AB InBev, 2011). The Balance Sheet When assessing the financial report, it may be difficult to assimilate incontrovertible revenue. In order to understand, one must real ize how interpret the financial avouchment as a whole.\r\nThe balance ragtime provides information about AB InBev’s assets, liabilities, and stockholder’s equity. Assets are things that a company kitty sell or use. These items let in physical property, inventory, equipment, etc. Intangibles are withal assets †things that outhousenot be touched, but nevertheless get value, i. e. patents and trademarks, investments the company makes. And of running cash is the main asset. Liabilities are fares that the company owes to new(prenominal)s. These amounts rear end include a loan secured to launch a new product, rent for use of a factory, or money owed to a supplier, etc.\r\nLiabilities too include future obligations, i. e. goods or go promised to be provided in the future. Shareholder equity (or dandy or acquit worth) is the money that would be left if a company change all of its assets and paid off all their liabilities. Any money left over belongs to t he owners (or shareholders) of the company. The balance mainsheet’s â€Å"equation” is Assets = Liabilities + Shareholders’ equity (Garrison, Noreen, & group A; Brewer, 2010). The balance sheet is set up with the assets listed and tallied on the left side, age liabilities and shareholders’ equity on the right.\r\nThe assets are usually listed in order of how quickly they slew be converted into â€Å"real” cash. Current assets are things that the company plans to convert to cash within one year, i. e. inventory. dead assets are things that are expected to be converted to cash longer than a year. Noncurrent assets include improve assets (not available for sale, i. e. office furniture). Liabilities are usually listed according to their due dates. Liabilities are any 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.\r\nShareh olders’ equity (SE) is the amount invested by the owners. SE is calculated by subtracting the company’s wage or losses from the owner’s investment in the company’s stock (Garrison, Noreen, & angstrom unit; Brewer, 2010). In assessing AB InBev’s balance sheet for 2011, the company had $39,046 million in revenues, a 4. 6% increase, and a tax income turn a profit of $22,412 million. It is stated in the annual report that a selective price increase was taken in the last quarter in anticipation of high commodity be. Cost of Sales (CoS) change magnitude by 1. 6%.\r\nThis increase was due; according to AB InBev in part to lower aluminum can costs in Latin America and procurance nest egg and implementation of their best practice programs in North America. The total operating expenses increase by 3. 7%. This was partly due to distribution expenses change magnitude by 9. 2%. Brazil had higher transferral costs, while Latin America South saw highe r labor costs and higher shift tariffs in Ukraine and Russia. Sales and marketing expenses increased by 4. 1% because, specifically in North America, more investments in brand delete savings in non-working money. Administrative expenses increased by 0. % due to fixed cost savings in the unite States offset by salary increases and elaborateness costs in China and Brazil. Other operating income was $694 million compared to $64 million in 2010 mainly because of tax incentives in China and Brazil (AB InBev, 2011). The Income Statement An income statement shows how practically revenue a company earned and the costs associated with earning said revenue. The stool line of an income statement commonly shows the company’s light up losses or earning. This statement tells how much the company has do or befuddled over the accounting period, usually for a year or a portion in that locationof.\r\nIncome statements reports hire per share (EPS). (To calculate EPS, the total exc ulpate income is divided by the number of outstanding shares of the company). An income statement withal shows how much shareholders would receive 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 generalize certain costs and operating expenses associated with earning said revenue. The bottom line tells how much the ompany earned or lost during the period. The beginning is the â€Å"gross” revenue (or sales). The next line is the amount the company does not expect to put one over (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(prenominal) net reve nues is usually costs of sales. Costs of sales is the amount the company has spent producing the goods or services sold during the accounting period.\r\nSubtracting cost of sales from net revenues gives a subtotal of gross profit ( as well as cognize as gross margin) (Garrison, Noreen, & Brewer, 2010). The operating expenses are listed next on the income statement. These expenses support a company’s operations, i. e. salaries, marketing, etc. Because operating expenses cannot be associate to the action of products or services being sold, they are diverse from costs of sales (Garrison, Noreen, & Brewer, 2010). Depreciation is also deducted. Depreciation is the amount of wear and tear on assets (machinery, tools, etc. ) that are used over long term.\r\nThis amount is spread over the periods they are used and is called wear and tear or amortization. After this deduction from the gross profit, the income from operations is arrived. This amount is before engagement a nd income tax expenses (Garrison, Noreen, & Brewer, 2010). The next section allows companies to account for interest income and interest expense. Interest income is earned from interest-bearing savings accounts, money market funds, etc. Interest expenses are monies paid in interest on loans, etc. Some companies show these separately and some combine the two.\r\nThe 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 InBev’s 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 elaborateness increase up to 42. 9%, driven by growth in overhead cost reductions and gross profit.\r\nIn the combined statement (the gathering of all AB InBev’s companies), the EBIT for 2011 is $12,607 million and an EBITDA of $15,357 million (AB InBev, 2011). gold Flow Statements While 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. money flow statements shows the inflow and outflows of the company’s cash. This statement is very important because it proves that the company has enough money to pay expenses, purchase assets, and stay competitively profitable.\r\nWhereas other financial statements shows an absolute 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 InBev’s financial report consolidates the activities, followed by a breakdown of the activities including explanations.\r\nOperating 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 tangible cash the company received from and used in its operating activities.\r\nThis process adjusts net income for any non-cash items, i. e. adding depreciation expenses back, and for any cash that was a source or a use provided by other operating assets and liabilities (Garrison, Noreen, & Brewer, 2010). AB InBev’s financial rep ort of cash flows shows an increase in operating activities. This increase is due to a higher profit and inviolate 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 associate to higher capital expenditures.\r\nThese 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 as 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).\r\nAB InBev’s 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 visualize demands in the growing market.\r\n rough 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 modify administration (AB InBev, 2011). Financing activities. The last section is financing activities. This part of the cash flow statement shows the common sources of inflow, including cash elevated by selling stocks or bonds and borrowing funds from a bank (Garrison, Noreen, & Brewer, 2010). Cash inflow fr om financing activities was $8,996m in 2011, compared to 2010’s $6,757m.\r\nThe 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 liquidity needs; the company’s indemnity is to rely on cash flows from operating activities to fund its continuing operations (AB InBev, 2011). Analysis of AB InBev’s Financials According to the 2011 annual report, Anheuser-Busch InBev saw a year of solid performance and progress. AB InBev undergo growth, spread out their EBITDA margin, grew EPS, and made strides in de-leveraging the balance sheet.\r\nAB InBev experienced a strong growth from their three well-known(a) global brands: Budweiser, Stella Artois, and Beck’s. These brands were up by 3. 1%. Stella Artois volumes increased by 5. 9%, with a 24% batch in sales in the United States, 13% in Argentina, and 200% in Brazil. The company continues to expand an d grow in China and Brazil. The company raised its dividends to 1. 20 euros per share, a 50 % increase. â€Å"These results were achieved despite wearied consumer confidence in several markets and increases in commodity prices. Faced with adverse conditions, our people did what they do best.\r\nThey 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 gelt are supported by the companys new NFL sponsorship. Felipe Dutra, AB InBev’s CFO said the increase could also â€Å"have something to do with the unseasonably mild wear” (AB InBev, 2011). The newly launched Bud Light Lime and Bud Light Platinum performed well.\r\nDutra said â€Å"We believe we have the rig ht brands to exploit that opportunity,” before, during and after the Olympic games. Budweiser has also extended sponsorship of the soccer World Cup through 2018. AB InBev will continue to rely to a great extent on their strategic brands (AB InBev, 2011). Conclusion A cardinal part of their culture is never being on the whole satisfied with their results: â€Å"we always challenge ourselves to dream bigger 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 company’s 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/articles/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.\r\n'