AB InBev Cuts Brazil Beer Forecast After Profit Misses Estimates

Anheuser-Busch InBev NV (ABI), the world’s biggest brewer, reported first-quarter profit that missed analysts’ estimates and said volume in Brazil may decline this year as business falters in its second-largest market.

Earnings before interest, taxes, amortization and depreciation, excluding some items, fell to $3.43 billion, the Leuven, Belgium-based brewer of Budweiser said today in a statement. That missed the $3.57 billion median estimate of 10 analysts. The shares fell as much as 3.6 percent.

AB InBev cut its forecast for the Brazilian beer market after an 8.2 percent first-quarter volume decline. This year’s earlier Carnival celebration, bad weather in Brazil, high inflation and weakened growth in disposable income weighed on consumers in that market, the Stella Artois maker said. Competitor Heineken NV (HEIA) flagged a decline in Brazil when it reported results.

“In light of Heineken’s earlier commentary, a small miss was probably in the price,” said Jonathan Fyfe, an analyst at Mirabaud Securities in London. “However, we are surprised at the depth of volume declines in Brazil and margin weakness in North America.”

Shares Drop

AB InBev traded 3.1 percent lower at 70.83 euros as of 12:01 p.m. in Brussels, giving the company a market value of 114 billion euros.

The Brazilian market will be “flat” or decline by a single-digit percentage this year, the brewer of Beck’s forecast today. The company previously expected a low-to-mid-single-digit volume gain.

AB InBev is seeking to attract consumers in Brazil with 1- liter and 300-milliliter returnable bottles of its brands including Brahma and Skol.

Organic revenue rose 1.5 percent, and the volume of beer AB InBev sold on the same basis fell 4 percent. Analysts had anticipated a 5.3 percent revenue increase and a decline of 0.3 percent in volume.

AB InBev, which won U.S. permission for its $20.1 billion takeover of Mexico’s Grupo Modelo SAB on April 20, is trying to glean growth from emerging markets and from innovations in developed markets. These include new versions of traditional brands such as Bud Light Platinum, which it started selling last year.

U.S. sales to wholesalers fell 5.2 percent, led by so- called sub-premium brands. The company said it estimated a 50 basis-point decline in market share. Share for its Bud Light brands was “marginally down” as Platinum growth slowed after strong demand at the time of its introduction last year.

Budweiser Innovation

The brewer had said in February it expected first-quarter volume in the U.S. to be hurt by short-term pressure on disposable income, but that profitability in the U.S. should improve this year. Chief Financial Officer Felipe Dutra said he still anticipates a recovery in profitability in North America, even as volumes decline, as the Michelob maker charges more for innovations such as Bud Light Lime Straw-ber-Rita, which the company expects to outperform its Lime-A-Rita variety.

The company will introduce a new bow-tie-shaped tin for its Budweiser brand in the U.S. this year to attract younger consumers.

Sales in China boomed 16 percent, as the Jinling maker gained share in the country by selling more Budweiser and Harbin. Western European volume fell 7 percent due to “an unusually cold and long winter season” while tax increases and sales restrictions in Russia and Ukraine dragged down central and eastern European volume 16 percent.

German beer sales dropped to the lowest level in at least 20 years, the Federal Statistical Office said today. Germany ranks only below the Czech Republic for per-capita beer consumption, according to 2010 statistics compiled by Kirin Holdings Co.

AB InBev also reduced its plans for spending on advertising and marketing this year compared with a prior forecast. It expects investments to increase “mid-to-high single-digits” compared with a prior expectation of “high single-digits.”

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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