Docstoc

bud

Document Sample
bud Powered By Docstoc
					Financial Analysis of the Anheuser Busch Corporation
           When you think of Budweiser, you think of a well known, well respected beer

that has been around for a very long time. They are well established and have built

themselves up to where they no longer have to worry about real competition. Budweiser

is a company that just continues to grow and become more profitable.

           When analyzing Budweiser the first thing you might notice about them is that

currently their accumulated debt is upwards of $8,276,000 and has gradually increased

every year and every quarter over the last five years. That may be a big concern for

people who are considering buying shares of Budweiser and investing in them for the

future. What they don’t realize is that Budweiser is such a profitable company that they

really don’t have a problem dealing with debt. In fact, Budweiser has been known to re-

purchase a lot of their stocks in order to create value in the market. Essentially they are

helping their stockholders out by purchasing their stocks back and increasing the market

price of the stockholders shares. This is also very similar to finding the companies

financial leverage, which is the process of borrowing money, which creates debt, and

reinvesting it in order to create a greater rate of return.1 Currently the financial leverage

that Budweiser has is around 4.15. Whenever a company has financial leverage greater

than 1 they are in very good shape when it comes to turning debt into a higher rate of

return.

           Another aspect that people need to look at when they are planning on investing in

a company is how much they are growing. Anheuser Busch is continuing to expand and

grow their business. Their main product is beer and they own and produce many types of



1
    en.wikipedia.org/wiki/Financial_leverage
it. Their main products are Budweiser, Michelob, and Natural, along with many other

types which include owning 33.7% equity interest in Redhook and 39.5% interest in the

Portland based Widmer Brothers brand.2 They also just purchased the Rolling Rock

Company. 93% of Budweiser’s net sales come from inside the US and that is something

that they are trying to improve upon. In 2006 their worldwide sales were around 125

million barrels; internationally they distributed around 22.7 million barrels.3 They are

continuing to expand; now their beers are being sold in more than 30 countries.

        Another way that Anheuser Busch is growing is through the entertainment

industry. One of their subsidiaries is Busch Entertainment Corporation, which currently

owns nine theme parks including Busch Gardens and SeaWorld.4 So you see that

Budweiser is continuing to expand into other aspects of the market and they are

becoming very successful at it. With all the fields that Budweiser is going into and the

ones they are currently in, there is no doubt that they will continue to expand their

business and continue to make money for their shareholders.

        One question people might be asking is, “How can they service their debt?” It

seems like a fair question since people still see the fact that the companies debt is

continuing to grow on a steady, year-to-year basis. But you have to look at the way the

company deals with its debt. Anheuser Busch is a very profitable company and they will

continue to be a profitable company long into the future. The big thing they have on their

side is their name. Budweiser is a trusted name in the beer industry and they will

continue to have loyal customers who will continue to buy their products no matter what.

That is one thing that a company depends on, having customers who will continue to

2
  stocks.us.reuters.com/stocks/fullDescription.asp?rpc=66&symbol=BUD
3
  stocks.us.reuters.com/stocks/fullDescription.asp?rpc=66&symbol=BUD
4
  stocks.us.reuters.com/stocks/fullDescription.asp?rpc=66&symbol=BUD
support them. The other thing they have is a smart way of investing their debt in order to

make more money for their shareholders. As we mentioned earlier, Budweiser likes to

re-purchase their stocks in hopes of creating value in the market. This is another way that

the company manages their debt, because if you look at the trends, Budweiser’s debt has

not grown that much over the last five years. They are very smart in the way they deal

with their debt and they are very smart in the way they manage their debt. Most

companies will take out loans and try to improve a product or buy more equipment so

they can come up with new products in hopes that those products will make them money

in the future. Budweiser isn’t trying to improve their products, they already have a

number of successful subsidiaries that bring in money for them along with the products

they produce and sell. They are trying to help out the people who invest in them by

making them money. When they take on debt, they re-invest that debt in hopes of

making a profit right now, not in the future.

       Re-purchasing stocks is also a good way for Budweiser to deal with their financial

obligations. Since their profits are so high and consistent, they don’t usually have

problems fulfilling their financial obligations. The company has money coming in all the

time, so in that respect, they are usually able to handle obligations quickly and without

incident. This also helps them to be successful when they invest in something. We’ve

noticed that Anheuser Busch won’t take on a product or company unless they are already

established and have a good following. They are very smart when they invest and it

shows in the profits the company makes. Just look at their investments in purchasing

theme parks. They own nine of those parks through their subsidiary BEC, and all of

those parks were previously owned and operated. They all made money before Anheuser
Busch got involved. It’s usually a smart investment when you know that a company is

profitable and has been making money in the past. Not only are they smart investors, but

they don’t take too many risks when they’re investing either. They may take a risk when

they invest in a new beer company or when they invest their stocks, but when it comes to

making a big purchase like buying theme parks, you don’t want to have too many risks to

where you could lose a lot of money if things don’t work out.

       That is why we believe that Budweiser will continue to be a profitable company

for years to come. They continue to invest wisely and they continue to make a quality

product that has people coming back and buying it again and again. When those things

happen, your company succeeds.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4
posted:9/17/2011
language:English
pages:4