New York, March 27, 2012 -- Moody's Investors Services today upgraded the long-term senior
unsecured ratings of Anheuser Busch InBev ("ABI") to A3 from Baa1.
The company's commercial paper rating of Prime-2 was affirmed.
The rating outlook is positive.
RATINGS RATIONALE
"The upgrade to A3 reflects ABI's continued progress in reducing
debt and improving credit metrics as a result of its good business momentum,
successful cost reduction initiatives, expanding margins,
and balanced growth " said Linda Montag, Moody's Senior Vice President.
The positive outlook reflects Moody's expectation that management
will remain committed to reducing leverage further while growing the scale
and profitability of the business which could lead to a further upgrade.
Despite soft beer volumes in developed markets which challenged volume
growth overall, ABI achieved mid-single digit revenue growth,
boosted by strong performance in emerging markets and price increases
across most markets. Operating profits grew in the low double digit
range while EBIT margin improved to 32.6% from 30.8%
per Moody's FM. These improvements, in the face of a difficult
commodity environment, stiff competition and declining beer consumption
in some markets, as well as the absence of certain one-off
events that drove sales in the prior year, highlight the strength
of ABI's brands, business momentum and geographic diversity.
Moody's expects further profitability growth as the company continues
to cut costs and reap the benefit of revenue management initiatives that
have been implemented over the past year. Debt to Ebitda improved
from 3.5 times at the end of 2010 to 2.9 times in 2011 calculated
using Moody's adjustments, after the company paid down $5
billion in debt during the year. Moody's believes that debt
to Ebitda will fall below 2.5 times within the next 12 to 18 months
as the company continues to de-lever to meet its stated target
of reported net debt to Ebitda of 2 times.
Anheuser Busch InBev's ratings reflect the company's scale as the world's
largest brewer, its wide portfolio of beer brands at various price
points, leading market positions in some of the world's largest
and most profitable beer markets and seasoned management with a solid
track record of integrating acquisitions and reducing leverage.
The ratings are further supported by the company's strong margins and
high, recurring cash flows generated by its operations. At
the same time, the ratings factor in the company's exposure to somewhat
more volatile economies, although it has a broadly balanced earnings
base, the difficult consumer environments in North America and Western
Europe, and continued high commodity prices which slows down margin
improvement.
The positive outlook is based on Moody's expectations that ABI will be
able to improve its credit metrics further in the coming year on the back
of its (i) strong profitability and cash flows; (ii) continued business
momentum; (iii) ongoing improvements in efficiency and cost reduction;
(iv) revenue management initiatives and (v) commitment to its 2.0
times leverage target.
An upgrade to A2 would require sustained good business momentum,
the continuation of a conservative financial policy and improvement in
credit metrics with retained cash flow/ net debt ratio in the mid 20%
range and debt to EBITDA at or below 2.5 times (calculated using
Moody's accounting adjustments).
Although unlikely in the near term, the ratings could be downgraded
if debt to EBITDA is sustained materially above 3.0 times or retained
cash flow/ net debt falls materially below 20%, both calculated
using Moody's accounting adjustments. Large debt financed acquisitions,
aggressive, debt financed shareholder returns, or sustained
operating difficulties in key markets could also lead to a downgrade.
The principal methodology used in rating ABI was the Global Alcoholic
Beverage Rating Methodology published in September 2009. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
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on www.moodys.com.
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Linda Montag
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
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Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
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Moody's upgrades Anheuser Busch InBev to A3; Outlook positive
