AB InBev Volume Misses Estimates as U.S. Consumption Drops
AB InBev Volume Misses Estimates as U.S. Consumption Drops
Whitney Curtis/Bloomberg
AB InBev, the brewer of Bud Light and Stella Artois, predicted in February that growth would be “soft” in the quarter, as a high number of jobless U.S. consumers and heavy rain in Brazil reduced purchases.
AB InBev, the brewer of Bud Light and Stella Artois, predicted in February that growth would be “soft” in the quarter, as a high number of jobless U.S. consumers and heavy rain in Brazil reduced purchases. Photographer: Whitney Curtis/Bloomberg
Anheuser-Busch InBev NV (ABI), the world’s biggest brewer, reported first-quarter volume that missed estimates as high unemployment levels in the U.S. caused consumers to drink less beer.
Organic volume, which excludes the effects of acquisitions or disposals, slid 0.4 percent, the Leuven, Belgium-based company said today in a statement. The median estimate of 15 analysts surveyed by Bloomberg News was for a 1.4 percent increase.
Volume in North America dropped 3.4 percent in the quarter amid lackluster demand and as the company raised prices. AB InBev, the brewer of Bud Light and Stella Artois, predicted in February that growth would be “soft” in the quarter as a high number of jobless U.S. consumers and heavy rain in Brazil reduced purchases. Market share of its Budweiser brand continued to decline in the U.S., although at a slower pace than in the previous quarter.
“Despite management guiding to a soft start to the year in March, the first quarter still came in below the consensus on organic volume,” analysts at Jefferies in London including Dirk Van Vlaanderen wrote in a note today. “The U.S. remains challenging and Brazilian volumes were slightly softer than expected.”
Shares Slide
AB InBev shares slid as much as 1.62 euros, or 3.8 percent, to 41.25 euros and traded at 41.60 euros as of 9:51 a.m. Brussels time. The stock has dropped 2.8 percent this year, giving the company a market value of 66.8 billion euros ($99.3 billion).
“High levels of unemployment, especially amongst core consumers, continue to affect overall beer industry volumes” in the U.S., the company said today in the statement. “We continue to believe that a recovery in the U.S. economy is a question of when and not if. In the meantime we will remain focused on building the health of our brands.”
Sales in Brazil were held back by capacity shortages as well as heavy rainfall, as demand outstripped supply. That led to a 0.4 percent decline in volume in the country’s sales in north Latin America. The company is adding capacity to its existing plants in the country and building a new factory in the north-east, Chief Financial Officer Felipe Dutra said today on a conference call. The factory will start production in the second half of the year.
Net Income
First-quarter net income more than doubled to $964 million from a year earlier, helped by lower interest charges on debt. Analysts had estimated profit of $1.15 billion. Standard & Poor’s Ratings Services raised the brewer’s long-term debt rating to A- in April, citing cash generation and debt reduction.
Sales rose to $9 billion, compared with the analysts’ estimate of $8.89 billion. Excluding acquisitions, sales grew 5.6 percent as the company sold more higher-priced beers as consumers traded up to more expensive brands and after the company raised prices in the second half of 2010 in Brazil and the U.S., its two largest markets, according to Dutra.
Normalized earnings before interest, taxes, depreciation and amortization, which exclude one-time gains or costs, rose to $3.41 billion from $3.09 billion. On an organic basis, Ebitda increased 6.5 percent. Analysts had estimated an 8.3 percent increase.
Cost of Goods
The cost of goods rose 3.3 percent in the quarter amid a 15 percent increase in distribution expenses, the company said, citing factors including the cost of transporting its beers to areas of Brazil where AB InBev doesn’t yet have factories. The company expects distribution costs to increase “in mid- single digits” for the year as distribution costs decrease compared with the first quarter, Dutra said.
AB InBev, which was created when InBev NV took over St. Louis-based Anheuser-Busch Cos. in 2008 for $52.5 billion, said it cut $75 million of costs in the first quarter. The company has a three-year target of achieving $2.25 billion in annual cost savings by the end of 2011, with $270 million of that coming from measures including closing factories this year.
To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.
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