Nov. 12 (Bloomberg) -- Anheuser-Busch InBev NV, the world’s largest brewer, reported slowing third-quarter profit growth after cost cuts failed to offset declining beer sales in markets from the U.S. to Europe.

Earnings excluding interest, taxes, depreciation and amortization rose 12 percent to $3.55 billion on a so-called organic basis, the Leuven, Belgium-based company said today. That matched the average estimate of 12 analysts surveyed by Bloomberg News, and slowed from the 19 percent growth reported in the second quarter. Net income beat analysts’ estimates on a one-time gain from asset disposals.

The brewer of Stella Artois and Budweiser is grappling with shrinking beer markets in all of its regions except Latin America. Revenue fell 10 percent to $9.76 billion, lower than the $10.11 billion estimate of the analysts.

“They’re still improving the business, but the rate of improvement is not as fast as we’d been expecting,” Trevor Stirling, an analyst at Sanford C. Bernstein, said in an interview today. “The U.S. was definitely worse than expected.” Stirling has an “outperform” rating on the shares.

Shipments in the U.S. fell 5.1 percent in the quarter, while western Europe declined 3.3 percent, led by weakness in Germany and Belgium. The company expects an “improved” volume performance in both markets in the fourth quarter, Chief Financial Officer Felipe Dutra said on a conference call.

Shares Fall

The shares rose 50 cents, or 1.5 percent, to 32.59 euros in Brussels, reversing a loss of as much as 4.2 percent in earlier trading. The shares have more than tripled from their low a year ago when the company announced it would sell new stock to repay debt.

The company’s overall 3.3 percent decline in beer sales by volume accelerated from the second quarter’s 1.5 percent drop, as market share gains in Brazil and Argentina were eroded by lower sales in the U.S. and Europe.

The performance of AB InBev’s so-called focus brands, which represent two thirds of sales, suffered in the period, with volumes rising 0.4 percent, slowing from the second quarter’s 1.5 percent pace.

“Eventually you’ve got to grow the top line; you can’t go on cutting costs forever,” Andrew Holland, an analyst at Evolution Securities Ltd. in London, said in an interview yesterday. “They’ve had five years of cutting their way to greatness and probably only another year left.” Holland has a “sell” rating on the shares.

Russian Plunge

To help restore growth, the company said it’s releasing two new beers in the U.S.: Bud Light Golden Wheat and Select 55. Investment in sales and marketing will rise “significantly” in the final quarter of the year to support the new brands and the push behind Budweiser globally, Dutra said.

Central and eastern Europe volumes fell 17 percent, driven by Russia, where “difficult market conditions” saw sales plummet 20 percent. That market may suffer further as “it looks much more likely than not” that Russia will raise beer taxes, Dutra said.

Rival SABMiller Plc last month said beer sales by volume fell 1 percent in the six months through September, and reported a 12 percent decline in Russian volumes.

AB InBev’s Latin American unit, Sao Paulo-based Cia. de Bebidas das Americas, also reported figures today. The company, known as AmBev, said third-quarter profit rose to 1.23 billion reais ($716 million) from 1.16 billion reais a year earlier, bolstered by market share gains in Brazil and price increases. The unit will invest as much as 50 percent more in expanding factories and production lines to meet rising demand.

Savings Target

AB InBev has slashed marketing, administration and production expenses since last year’s takeover of Anheuser-Busch by the former InBev, and cut $265 million of expenses in the third quarter, bringing year-to-date savings to $875 million.

The company is targeting $1 billion in savings this year and $2.25 billion within the first three years of the acquisition. Dutra today signaled there may be room to expand that target as the company rolls out Anheuser brands such as Budweiser into new markets.

“We can now focus all of our efforts on growing our core business, including realizing top line synergy opportunities not considered in our $2.25 billion synergy commitment,” Dutra said in the statement.

A “better-than-expected” reduction in selling expenses, greater procurement power, and falling raw material costs helped the ebitda margin rise 3.9 percentage points to 36.4 percent. The company also drove through “selective price increases” to help counter slipping volumes.

Net income for the quarter was $1.55 billion, helped by a $436 million one-time gain from the sale of its South Korean unit. That beat the $1.39 billion average of eight estimates compiled by Bloomberg.

In August, AB InBev said earnings growth would be “significantly less” in the latter half of the year, with the third quarter to be an “especially challenging” comparison with the prior-year period, when Bud Light Lime was released.

To contact the reporter on this story: Andrew Cleary in London at acleary7@bloomberg.net.

Last Updated: November 12, 2009 12:57 EST