AB InBev beverage brands. Pixabay Image.
This article presents the debt levels of Anheuser-Busch InBev (AB InBev).
Apart from the debt, we also look at AB InBev’s cash assets which consist of cash & cash equivalents, deposit, and investments less bank overdrafts.
The net debt and net debt to EBITDA ratio are other important measures that we will find out.
For leverages, we will explore AB InBev’s debt-to-equity and debt-to-asset ratios.
The debt margin, calculated as total debt divided by revenue, is another leverage ratio that we will measure.
The ability of AB InBev to service its debt is important as it may decide if lenders will extend credits and provide liquidity to the company.
As such, we will measure AB InBev’s interest coverage ratio, calculated as profit from operations (an IFRS measure), as well as the normalized EBITDA (a non-IFRS measure), divided by finance expenses net of finance income.
Finally, we will look at AB InBev’s debt maturities to find out whether the company has sufficient liquidity to cover the debt payments when they are due.
Let’s start with the following topics!
Table Of Contents
Consolidated Results
A1. Total Debt
A2. Total Cash Assets
Net Results
A3. Total Debt Less Cash
A4. Net Debt To Normalized EBITDA
Leverage Ratios
B1. Debt To Equity Ratio
B2. Debt To Asset Ratio
B3. Debt To Sales Ratio (Debt Margin)
Debt Expenses Coverage Ratios
C1. Profit From Operations To Debt Expenses
C2. Normalized EBITDA To Debt Expenses
Debt Schedules And Credit Rating
D1. Debt Payments Due
D2. Credit Rating
Summary And Reference
S1. Conclusion
S2. References and Credits
S3. Disclosure
AB InBev’s Total Debt
AB InBev total debt
(click image to enlarge)
As of fiscal 2022, AB InBev’s total debt outstanding was at a 6-year low and totaled $79.9 billion USD.
Compared to a year ago, AB InBev’s total debt in fiscal 2022 has declined by 10%.
Since fiscal 2017, AB InBev’s total debt has been on a decline and was down by as much as 31% over the 6-year period, driven primarily by the deleveraging effort of the company.
This debt figure represented roughly 70% of the company’s market capitalization as of the date this article was published.
AB InBev’s Total Cash Assets
AB InBev cash assets
(click image to enlarge)
In terms of cash position, AB InBev’s cash or near-cash assets totaled slightly over $10 billion USD as of 2022.
On average, AB InBev carries roughly $11 billion of cash or near-cash assets.
While this figure may seem like a lot, it is only a drop in the bucket compared to the company’s massive amount of debt.
AB InBev’s cash or near-cash assets could only cover about 13% of the company’s total debt based on the fiscal 2022 figures.
In other words, AB InBev will not be able to pay off its total debt with only its cash.
AB InBev’s Net Debt
AB InBev net debt
(click image to enlarge)
Even after taking into consideration AB InBev’s cash and near-cash assets, the company still owes a massive $70 billion to lenders as of fiscal 2022.
However, it is good to see that the company’s net debt is on a decline and reached a record low as of 2022.
AB InBev’s declining net debt is the result of the company’s deleveraging efforts in which the company pays off its debt progressively over the years.
AB InBev’s Net Debt To Normalized EBITDA Ratio
AB InBev net debt to normalized EBITDA ratio
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AB InBev intends to achieve a net debt-to-normalized EBITDA ratio of 2.0X.
As of fiscal 2022, the company’s net debt-to-normalized EBITDA ratio measured at 3.51X, still quite a far-off number from the targeted ratio of 2.0X.
However, the ratio has declined significantly since 2021, indicating the company’s great efforts at maximizing returns and allocating resources.
In this aspect, AB InBev maximizes its return through the improvement of the normalized EBITDA.
On the other hand, the company allocates a great deal of resources to debt reduction.
And, we are seeing both of these efforts in AB InBev.
Since 2020, AB InBev’s normalized EBITDA has risen by 15% while its debt has reduced by 19%.
Therefore, AB InBev is working to drive long-term value creation for shareholders.
AB InBev’s Debt To Equity Ratio
AB InBev debt to equity ratio
(click image to enlarge)
In terms of leverage, AB InBev’s debt-to-equity ratio in fiscal 2022 was at a 6-year low and totaled 95%.
This ratio says that the company had $1 dollar of debt to $0.95 dollar of equity.
Therefore, AB InBev’s debt was slightly higher than the total equity.
In my opinion, I believe that AB InBev was moderately leveraged with respect to equity but the result needs to be compared to the industry average to arrive at a conclusion.
AB InBev’s Debt To Asset Ratio
AB InBev debt to asset ratio
(click image to enlarge)
The debt-to-asset ratio reflects AB InBev’s capital structure, also known as the debt structure.
In AB InBev’s case, its capital structure was 38% debt as of fiscal 2022, suggesting that debt made up a moderate portion of the company’s total assets.
The good part is that the ratio has been on the decline and was at a 6-year low as of fiscal 2022.
Therefore, AB InBev’s leverages have been on the decline and the company is committed to reducing its leverages.
AB InBev’s Debt To Sales Ratio (Debt Margin)
AB InBev debt to sales ratio
(click image to enlarge)
AB InBev also has managed to drive its debt margin to a record low of 138% as of fiscal 2022.
Despite the decline in the ratio over time, it was still considerably high in fiscal 2022 at 138% of sales revenue.
With this ratio, AB InBev carried $1.38 dollar of debt for every $1 dollar of sales produced.
Fortunately, this ratio has been on the decline and had declined the most in the past 2 years, illustrating the company’s commitment towards deleveraging and maximizing return.
AB InBev’s Profit From Operations To Debt Expenses Ratio
AB InBev interest coverage ratio
(click image to enlarge)
Despite the seemingly high debt levels, AB InBev had been able to cover all of its debt expenses as shown in the chart above, even for the period dated before the COVID-19 pandemic.
As seen, AB InBev’s profit from operations had been sufficiently large enough to cover all debt expenses by at least 1X.
On average, the interest coverage ratio with respect to profit from operations totaled 2.74X between fiscal 2017 and 2022, a reasonably comfortable level for any company.
The good part is that AB InBev’s interest coverage with respect to profit from operations had significantly risen since fiscal 2020 and reached a record high of 3.50X as of 2022, illustrating how the company’s financial health had recovered from the COVID fallout.
AB InBev’s Normalized EBITDA To Debt Expenses Ratio
AB InBev interest coverage ratio
(click image to enlarge)
The normalized EBITDA is a non-IFRS measure and works more like cash earnings by stripping out most non-cash and irregular items.
That said, with respect to cash earnings, AB InBev’s interest coverage ratio is at an even more comfortable level.
As shown, AB InBev’s interest coverage with respect to normalized EBITDA was at a 3-year high of 4.78X in fiscal 2022.
In other words, AB InBev’s cash earnings in fiscal 2022 were able to cover all debt expenses by nearly 5 times.
AB InBev’s Debt Payments Due
AB InBev debt maturities
(click image to enlarge)
An analysis of AB InBev’s debt and leverage will not be conclusive without a mention of the corresponding debt maturity date.
As shown in the snapshot above, AB InBev’s debt due in the next 3 years (from 2023 to 2025) totaled about $4.7 billion USD.
AB InBev should have no problem covering the debt due in the next 3 years as the company’s $10 billion cash assets reported in Q4 2022 alone can easily pay off this amount and still be left with $5 billion cash.
However, for 2026 and beyond, AB InBev will most likely need to refinance its debt as the amount comes due is nearly $10 billion USD.
Therefore, in the near term, AB InBev should not have any debt payment problems.
AB InBev’s Credit Rating
AB InBev’s credit ratings as of 31 Dec 2022.
| Rating Institutions | Types Of Indebtedness | Outlook | |
|---|---|---|---|
| Long-Term Debt | Short-Term Debt | ||
| Standard & Poor’s | BBB+ | A-2 | Positive |
| Moody’s Investors Service | Baa1 | P-2 | Positive |
As of 31 December 2022, AB InBev’s credit rating from Standard & Poor’s was BBB+ for long-term obligations and A-2 for short-term obligations, with a positive outlook.
Standard & Poor’s credit rating definitions can be found here – Investopedia and Hargreaves Lansdown.
The company’s credit rating from Moody’s Investors Service was Baa1 for long-term obligations and P-2 for short-term obligations, with a positive outlook.
Moody’s credit rating definitions can be found here – Moody’s.
Conclusion
In summary, AB InBev carried $80 billion of debt as of 2022, and that put the company as moderately indebted as well as leveraged.
The good part is that AB InBev has been putting efforts into reducing its debt levels.
As a result, we are seeing declining debt figures and all leverage ratios.
Moreover, most of the company’s debt results and ratios were at a 6-year best as of 2022.
In the near term, AB InBev does not need to refinance its long-term debt.
However, in the longer term, it may need to do so.
References and Credits
1. All financial figures presented in this article were obtained and referenced from AB InBev’s earnings reports, financial documents, SEC filings, press releases, etc, which are available in AB InBev Investor Relations.
2. Featured images in this article are obtained from Pixabay.
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