Brewers and Distilleries Are Hit Hard by the Pandemic
Brewers and Distilleries Are Hit Hard by the Pandemic
(Bloomberg) -- Anheuser-Busch InBev NV withdrew its earnings outlook for 2020 and Pernod Ricard SA forecast a 20% drop in profit as the coronavirus pandemic eliminates most of the revenue that drinks makers get from bars and restaurants.
AB InBev abandoned its target that earnings growth could reach 5%, the world’s largest brewer said Tuesday. Pernod now expects the steepest earnings decline in years.
Businesses big and small have been hit by the outbreak, which has upended lives and social norms across the globe. Many countries have ordered bars and restaurants to shut to try to slow the spread of Covid-19 as the disease has reached almost every country. Companies from plane maker Airbus SE to retailer Macy’s Inc. have withdrawn earnings forecasts and suspended dividends.
Pernod said it gets a quarter of its revenue from bars and restaurants, and it’s forecasting that business will be absent from mid-March through June. The company expects a slow recovery in China starting next month, and sales from duty-free and shops in travel locations will drop 80% in the five months through June.
AB InBev also pushed back the closing date for the $11 billion sale of its Australian operation Carlton & United Breweries to Japan’s Asahi Group Holdings Ltd. because it remains under review by Australian competition regulators. The deal is now expected to close in the second quarter, the beermaker said.
Shares of AB InBev rose as much as 4.1%, having lost almost half their value this year. Pernod, which has dropped about 20% since December, gained 2.9%.
The bleaker outlooks show that the industry isn’t banking on an uplift from any alcohol hoarding.
Last month, AB InBev predicted its worst quarter in a decade as it factored in the impact from China’s lockdown at the beginning of the year, and Chief Executive Officer Carlos Brito’s annual bonus was cut. Now, as China slowly recovers, the virus is wreaking havoc on the rest of the world. The U.K. ordered pubs to shut last week, and Hong Kong on Monday banned restaurants and bars from serving alcohol.
The brewer is starting to produce hand sanitizer and disinfectants as part of virus relief efforts.
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