AB InBev Profit Rises 11% as Brazil Gains Offset Weakness in U.S., Russia

Anheuser-Busch InBev NV, the world’s largest brewer, reported an 11 percent increase in first-quarter profit after a marketing campaign ahead of the soccer World Cup boosted sales and market share in Brazil.

Earnings before interest, taxes, depreciation and amortization rose to $3.09 billion, from $2.79 billion a year earlier, the Leuven, Belgium-based company said in a statement today. That beat the $2.97 billion average estimate of 14 analysts compiled by Bloomberg, and compared with growth of 10.7 percent in the fourth quarter. Revenue rose to $8.33 billion, more than the $8.21 billion estimate of the analysts.

The maker of Budweiser and Stella Artois stepped up marketing in Brazil ahead of next month’s soccer tournament, with TV and billboard ads featuring striker Luis Fabiano and national coach Carlos Dunga. AB InBev said in March that earnings growth would slow in the first half on a weak U.S. beer market, where shipments fell 6.8 percent in the quarter.

“Brazil is the star of the show, the U.S. disappoints,” Melissa Earlam, an analyst at UBS AG in London, said in a note today. A forecast slowdown in Ebitda growth in the second quarter because of increased marketing expenses “confirms our confidence in ABI’s brand-building strategy,” she said. Earlam has a “buy” recommendation on the shares.

AB InBev, formed in the 2008 merger of InBev NV and Anheuser-Busch Cos., rose 78 cents, or 2.2 percent, to 36.88 euros as of 9:26 a.m. in Brussels trading. The shares have added 1.3 percent this year, compared with gains of 9.5 percent and 4.6 percent at closest rivals SABMiller Plc and Heineken NV.

Earnings Dip

Ebitda rose 5.1 percent, excluding the impact of disposals last year, which included the sale of breweries from South Korea to eastern Europe. Growth will be “somewhat slower” in the second quarter due to increased advertising around the World Cup, before rising in the second half, the company said.

So-called organic volume, which excludes the contribution of the assets sold from the prior-year period, rose 0.8 percent in the quarter. That compares with a 2 percent increase at SABMiller and a 5.3 percent decline at Heineken.

Organic volume plunged 14 percent in central and eastern Europe after Russia tripled its excise tax on beer, and rose 16 percent in Brazil.

An increase in disposable income and an earlier Easter period boosted beer and soft drink sales in Brazil as the country’s economy recovered from recession, the brewer’s local AmBev unit said today. Brazil’s gross domestic product is forecast to grow 6.1 percent in 2010, after contracting 0.2 percent last year, according to a central bank survey.

Brazil Campaign

Beer sales fell in all regions except northern Latin America and Asia Pacific, where growth in China helped the company increase volume by 5.1 percent. The brewer plans to expand into new Chinese provinces and “keeps assessing potential M&A opportunities” in the country, Chief Financial Officer Felipe Dutra said on a conference call today.

Chongqing Brewery Co., the beer maker controlled by the government of China’s largest municipality, said last week that AB InBev was one of three European brewers that bid for a 12.25 percent stake. Chongqing has a “very strong business,” said Dutra, who declined to comment further on any bid.

In the U.S., the company’s largest profit pool, there are “encouraging indicators but it’s too early to say that the worst is behind us,” Dutra said.

Marketing Expenses

AB InBev’s sales and marketing expenses increased 4.8 percent from a year ago, led by the increased activity in Brazil. The company raised its spending 20 percent in the final quarter of 2009, the first of the big four European brewers to boost advertising after the global downturn in beer sales.

The Anheuser unit in the U.S. said yesterday it entered a multi-year agreement for Budweiser to sponsor the National Football League starting in 2011, taking over from rival MillerCoors LLC’s Coors Light brand. The company is working on plans to release Budweiser in several markets after the World Cup, with Brazil a “strong candidate,” Dutra said today.

AB InBev said cost savings related to the 2008 combination of InBev and Anheuser-Busch were $130 million in the quarter, taking total synergies since the merger to $1.49 billion.

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

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