AB InBev Profit Exceeds Estimates on Modelo Unit Savings

Anheuser-Busch InBev NV, the world’s biggest brewer, reported third-quarter profit growth that beat estimates as the company raised prices and reduced expenses after buying the rest of Mexico’s Grupo Modelo SAB.

So-called organic normalized earnings before interest, taxation, depreciation and amortization rose 10.5 percent in the three months through Sept. 30, the Leuven, Belgium-based company said today in a statement. The median estimate of nine analysts surveyed by Bloomberg News was for growth of 5.7 percent.

The Modelo purchase led to savings of $250 million in the four months since it closed, leaving AB InBev on track to meet its $1 billion goal by 2016. At the same time, the brewer has focused on selling pricier beers in the U.S. as demand for so-called mainstream brands wanes and market growth stagnates. Beer revenue growth on an organic basis rose 3 percent in the quarter, falling short of the 3.9 percent analysts anticipated.

“As we expected, this was not a good performance from a topline standpoint and the company leaned heavily on cost saving and pricing to make these numbers,” Anthony Bucalo, an analyst at Banco Santander SA in London, wrote in a note. “Management was sorely tested this quarter and came through in the newly acquired Mexico business and over-delivered in Asia.”

AB InBev’s shares rose as much as 3.5 percent, the steepest gain since Sept. 19. They were up 1.5 percent at 9:29 a.m.

The volume of beer sold by the company in the U.S. and Brazil, AB InBev’s biggest markets, fell more than the industry.

‘Growth Potential’

U.S. sales slid 2.7 percent compared with the beer market’s 1 percent decline there, the brewer said. AB InBev is “confident about the long-term growth potential for the industry, although labor participation and unemployment rates among young adult males remain a concern.”

Brazilian selling volume fell 5 percent and the company said it expects full-year sales for the country’s beer market to be at the “lower-end” of its guidance for an unchanged to low-single-digit decline. Industry volume in Brazil fell 4.3 percent in the quarter because of a weak economy, AB InBev said.

“We are not satisfied with our top-line performance in 2013,” the company said, adding that plans are in place for a “fast start in 2014.” The company’s Budweiser brand is the official beer of next year’s soccer World Cup, which is “due to bring tremendous excitement to Brazil,” Chief Financial Officer Felipe Dutra said on a conference call today.

Cost Savings

The integration of Modelo is achieving cost savings quicker than anticipated, the company said. Corona, the main brand acquired in the takeover, increased organic sales by 3.7 percent outside the U.S. The “very special brand” will be rolled out across Brazil ahead of the World Cup.

AB InBev joins rivals in reporting sales that missed estimates. Heineken NV last week cut its forecast for full-year profit after sales fell short of expectations amid weak consumption by beer drinkers in central and eastern Europe. AB InBev’s profit in that region fell 38 percent, the company said today, as beer volume tumbled 26 percent in Ukraine.

Consumer-goods companies including Unilever and Diageo Plc have reported decelerating sales in emerging markets, prompting concern about a slowdown in regions they’d previously relied upon to offset sluggish conditions in the U.S. and Europe.

Projections for emerging-market growth “were somehow linked to very, very high expectations that had to be reset,” Dutra said. “In our case we feel expectations were not that high, and what we’re facing is maybe at the low end of the range, but not off the charts and not a material departure from what we’d already said.”


Asia-Pacific sales grew 8.4 percent as AB InBev expanded its distribution of Budweiser and Harbin in China.

Total normalized Ebitda in the quarter was $4.66 billion, compared with the $4.47 billion median estimate. The measure excludes some items, while organic normalized Ebitda also strips out the effect of currency shifts and acquisitions.

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