AB InBev Sales Growth Misses Estimates as U.S., Brazil Drop

AB InBev Revenue Growth Misses Estimates
A Budweiser tractor trailer truck waits to be loaded at the Anheuser-Busch InBev NV Fairfield brewery in Fairfield, California, U.S.. Photographer: Ken James/Bloomberg

Anheuser-Busch InBev NV, the world’s largest brewer, reported growth in second-quarter sales that missed analysts’ estimates as it sold less beer in countries including Brazil and the U.S., its biggest markets.

Revenue rose 3.7 percent, excluding acquisitions, disposals and currency shifts, the Leuven, Belgium-based maker of Stella Artois said today, missing the 4.9 percent median estimate of seven analysts in a Bloomberg survey. The volume of beer sold fell 2.6 percent in Brazil and 1.4 percent in North America.

AB InBev’s market share in the U.S. declined by about 0.5 percentage point in the quarter after the company raised prices of some of its cheaper beers in a shift toward more-expensive products. The Budweiser brewer, which got more than three-quarters of revenue from the Americas last year, said it’s also being affected by low growth in disposable incomes in Brazil. Profit growth for the quarter met analyst estimates.

“The weaker volume and pricing performance in Brazil is disappointing,” Dirk Van Vlaanderen, an analyst at Jefferies International Ltd. in London, said in a note. “The U.S. remains tough,” said the analyst, who rates the stock “buy.”

AB InBev fell as much as 3.4 percent in Brussels trading. The stock was down 37 cents, or 1.1 percent, at 34.78 euros as of 11 a.m., the only decline on Belgium’s benchmark Bel20 Index, which was up 1.8 percent.

More-Expensive Beers

So-called normalized earnings before interest, taxation, depreciation and amortization rose to $3.75 billion from $3.35 billion a year earlier, the brewer said in a statement. The median estimate was $3.76 billion. Net income rose to $1.45 billion from $1.15 billion a year earlier.

The brewer said it’s committed to a strategy of selling a higher proportion of more-expensive beers in the U.S. It aims to narrow the gap in prices between premium beers such as Michelob Ultra and sub-premium brands including Busch to 15 percent from 25 percent in the next few years, Chief Financial Officer Felipe Dutra said in May. AB InBev has increased its share of high-end beer sales by 1 percentage point since December.

“In the U.S. we’re all monitoring what’s going on with the economy and politics, but we’ll focus on what we can control,” Dutra said today on a conference call.

Budweiser Share

The amount of beer sold in the U.S. was affected by poor weather in the quarter that included storms, tornadoes and flooding in the center of the country, AB InBev said.

Market share declines for the Budweiser brand continue to decelerate, the company said. The beer had the best half-year volume performance in the U.S. for 11 years, helped by promotions that included a national happy hour, or “Flag day,” on June 14. AB InBev has also introduced new packaging for its cans, featuring a red bow-tie design.

The decline in volume in Brazil was accentuated by the strength of the prior-year performance, when drinkers bought more beer at the time of the soccer World Cup. The company said it increased its share of the market in the Latin American country to 69.3 percent in June, and that its average share in the first half was 68.6 percent.

“Share gains should drive better volume,” Dutra said. “We have a high degree of confidence in Brazil.”

The total amount of beer sold in the quarter rose 0.3 percent, boosted by growth of 12 percent in the Asia-Pacific region. Total revenue gained 8.5 percent to about $10 billion.

Cost savings related to the 2008 acquisition of St. Louis-based Anheuser-Busch Cos. were $70 million in the quarter, the company said. AB InBev has a three-year goal for $2.25 billion of total savings from the $52.5 billion takeover by the end of 2011 and said today it’s on track to deliver “at least” $270 million of so-called synergies this year.

Net Debt

Net debt rose by $400 million to $40.1 billion at the end of the period, the company said, citing “the seasonality of our cash flows and the impact of foreign exchange fluctuations.” AB InBev aims to reduce the ratio of net debt-to-normalized Ebitda to 2 times during 2012, from 2.75 times now.

The 2011 outlook is “essentially unchanged,” the company said. Volume should improve in the second half, and revenue per hectoliter will probably grow at a faster rate than inflation, it said.


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