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AB InBev Earnings Beat Estimates as World Cup Boosted Sales

Anheuser-Busch InBev NV (ABI), the world’s biggest brewer, reported second-quarter profit growth that beat estimates as soccer World Cup-related beer sales in Brazil helped offset declining sales in the U.S.

Adjusted earnings before interest, taxes, depreciation and amortization rose 9.5 percent on an organic basis to $4.85 billion, the Leuven, Belgium-based company said. That compares with the median estimate of 13 analysts for 8.2 percent growth.

The brewer, which controls about two-thirds of the Brazilian beer market with brands such as Brahma, got a one-time boost from the tournament, during which it sold gold Budweiser bottles. Chief Financial Officer Felipe Dutra said it’ll be “extremely difficult” to maintain the growth rate in Brazil, though the brewer expects improvements this year there and in the U.S., its two largest markets.

“This was a good-quality set of results,” James Edwardes Jones, an analyst at RBC Europe, said in a note to clients. The shares rose as much as 1.7 percent. They traded 0.6 percent higher at 82.19 euros in Brussels at 10:05 a.m. local time, bringing the advance this year to 6.5 percent.

Brazil organic beer volume advanced 7.2 percent and 80 percent of sales were booked in the quarter, while the remainder of lager sales will fall in the third quarter.

Photographer: Luke Sharrett/Bloomberg

AB InBev expects improvements this year in the U.S. and Brazil, its two largest markets, where economic weakness restrained sales in 2013. Close

AB InBev expects improvements this year in the U.S. and Brazil, its two largest... Read More

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Photographer: Luke Sharrett/Bloomberg

AB InBev expects improvements this year in the U.S. and Brazil, its two largest markets, where economic weakness restrained sales in 2013.

World Cup sales were “in line, though not ahead of our expectations,” Dutra said on a conference call with journalists.

Brand Investment

Analysts and investors have speculated that AB InBev could take over its leading competitor SABMiller Plc, the maker of Grolsch and Peroni. Dutra said today that the company’s first priority is to invest behind its brands, though the company will “always be ready to look at opportunities if and when they arise.”

Dutra said the company’s optimum net debt to Ebitda level would be about 2 times, and after that AB InBev will explore a return of cash to shareholders through dividends or buybacks. At June 30, the ration of debt to earnings was 2.49 times.

AB InBev is seeking to boost sales and profit with new beer variants such as fruit-flavored Bud Lights, changes in packaging and by pushing more expensive drinks. Dutra declined to elaborate on whether volume will continue to grow at the same pace as the 2.4 percent reported in the first six months of the year during the second half.

Cost Savings

The company, created by a series of acquisitions over the past decade, boosted its Ebitda margin by 157 basis points as revenue improved and slashed another $135 million in costs related to its $20 billion purchase of the rest of Corona-maker Modelo last year. That leaves the company on track to deliver so-called synergies of about $1 billion from that deal by 2016.

AB InBev’s revenue grew 5 percent on an organic basis and own beer volume edged up 0.5 percent in the quarter, both measures falling short of what analysts had estimated. The company said it expects revenue increases to offset increased distribution costs this year.

Beer volume rose in Mexico, Brazil and Asia Pacific. U.S. sales to wholesalers fell 3.4 percent after AB InBev sold more to distributors in the prior period ahead of possible labor action. Sales to retailers slid 1 percent. The company said share there fell about 65 basis points last quarter, driven mainly by Budweiser.

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

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

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