Strong volume growth with better cash flows due to World Cup
Companhia de Bebidas das Americas (ADR) (NYSE:ABV), AMBEV-CIA DE B.A. ADR 1 (FRA:BBS): The upcoming 2014 FIFA World Cup will boost beer sales in Brazil and is expected to be a strong year for AMBEV-CIA DE B.A. ADR 1 (FRA:BBS). The World Cup will start in the winter and games will be played in the afternoon and early evening. Around 60,000 fans are likely to come, and government allowance of alcohol at stadiums will help to increase beer sales.
AMBEV-CIA DE B.A. ADR 1 (FRA:BBS) has been sponsoring the World Cup since 1986. In the 2010 World Cup, organized in South Africa, AMBEV-CIA DE B.A. ADR 1 (FRA:BBS)’s beer brand “Brahma” sponsored the event for the first time. Brahma will continue to sponsor the 2014 World Cup.
Brazil continues to be a growing and profitable unique market for AMBEV-CIA DE B.A. ADR 1 (FRA:BBS). Looking at medium and long-term growth prospects for organic growth, the company plans to increase investment in Brazil to $1.5 billion this year, which was $1.07 billion last year. It will invest in building breweries in Minas Gereas and the Parana states to improve its supply chain system for maximizing distribution. As a result, the company’s capex will rise to $3.6 billion in the current year.
Oxxo new openings and bond issue will contribute to growth of Femsa
On May 10, 2013, Fomento Economico Mexicano SAB (ADR) (NYSE:FMX) announced successful issuance of $1 billion in bonds in the U.S. bond market. It issued $300 million in a 10-year bond at a yield of 10-year treasuries plus 1.125% and $700 million in a 30-year bond at yield of 30-year treasuries plus 1.45%. The proceeds from the issues will be used for acquisition of a fast food chain, a drugstore chain, and pharmaceutical wholesalers.
Conclusion
Anheuser-Busch InBev NV (ADR) (NYSE:BUD)’s deal with Modelo and packaging innovation will strengthen its position in emerging markets and attract more consumers.
The 2014 World Cup will lift AMBEV-CIA DE B.A. ADR 1 (FRA:BBS)’s beer volume, and further decline in capex by 2014 will lead to strong results in that year.
Oxxo’s positive, top-line growth with new store openings and bond issuances will help in the long-term growth of Fomento Economico Mexicano SAB (ADR) (NYSE:FMX).
I recommend buying all three stocks.
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Beer Makers You Shouldn’t Miss This Summer originally appeared on Fool.com is written by Madhu Dube.
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