Fitch Ratings on Oct. 3 revised its outlook on Anheuser-Busch InBev SA to positive from stable, attributing it to the Belgian brewer's shift toward a "more creditor-friendly" financial policy.
The rating agency affirmed the company's long-term issuer default rating, or IDR, and senior unsecured rating at BBB, as well as its short-term IDR at F3.
"ABI has a very strong business profile and operating profitability that positions the group in the upper 'A' category" but that is offset by a highly leveraged balance sheet following the SABMiller PLC acquisition, Fitch said.
The agency said the IPO of its Asia-Pacific arm, Budweiser Brewing Co. APAC Ltd., and divesting its Australian subsidiary, Carlton & United Breweries, helped it apply about $15 billion of divestment proceeds to repaying debt in 2019-2020. Additionally, a 50% cut in dividends generated strong cash flow, allowing it to allocate an additional $4 billion a year to debt reduction.
"[T]he pace of de-leveraging would have remained slow in the absence of divestments," but it is now "steadier" as a result of lower dividend distribution, Fitch analysts said in the note.
From 2019, the agency expects that $4.5 billion to $5.5 billion a year will be available to pay down debt due to lower dividend distribution. It also projects the funds from operations adjusted net leverage to gradually decline to 4.5x by end-2021 from 6.2x at end-2018.
The company's management expects to reach net debt per EBITDA of under 4.0x by 2020, corresponding to an FFO adjusted net leverage of approximately 5.0x.
Despite recent debt reduction efforts, the company's leverage remains higher than at other investment-grade multinational food, beverage, tobacco peers and is far from achieving its commitment to a net debt per EBITDA target of 2.0x, Fitch noted.
"We expect ABI's high leverage, which has remained outside the range compatible with a 'BBB' IDR, improving from 2019 and reaching a net position of approximately USD80 billion by end-2020," the agency said.
Fitch said it could upgrade the company if it maintains the following: its existing efforts to reduce net leverage; its conservative financial policy; its organic growth capabilities and profitability; and its substantially larger scale than other major international competitors, including Heineken NV, Carlsberg A/S and Molson Coors Brewing Co.
The agency added that a downgrade is also likely if the company is unable to maintain funds from operations margin above 20% and if its free cash flow reduces.
