AB InBev First-Quarter Sales Growth Tops Forecasts on Brazil

Anheuser-Busch InBev NV, the world’s biggest brewer, reported sales growth that topped estimates amid increased marketing in Brazil, including the introduction of a gold aluminum Budweiser bottle to tie in with the brand’s sponsorship of the soccer World Cup.

Revenue in the first quarter of 2014 rose 8.9 percent from a year earlier, excluding the impact of currency shifts and acquisitions, the Leuven, Belgium-based company said today. Analysts had anticipated a 6.4 percent advance. Earnings were slightly below estimates as the spending crimped margins.

AB InBev increased marketing expenditure by 17 percent in the quarter as it stepped up investment around the World Cup. The soccer tournament starts next month in Brazil, where the brewer controls about two-thirds of the beer market. Budweiser’s gold bottle is part of the brand’s Rise As One campaign that also includes a series of films showcasing soccer stories.

AB InBev “is one of the very few staples offering double-digit earnings-per-share growth this year,” Citigroup Inc. analyst Andrea Pistacchi said in a note. “We don’t expect material moves to consensus on the back of Q1.”

AB InBev shares were up 0.4 percent at 76.93 euros as of 11:54 a.m. in Brussels trading.

The increase in quarterly marketing spending was greater than AB InBev’s annual forecast for a “low- to mid-teens percentage” increase and more than some analysts had expected.

Brazil Tax

The brewer said it expects improvements in both the U.S. and Brazil this year, countries where economic weakness weighed on sales in 2013. Brazil’s beer industry should see a resumption of volume growth this year, the company said, as an improving economy and the World Cup outweigh the impact of a tax increase.

Brazil’s government said in April it will raise taxes on beverage sales from June 1 to increase revenue after suffering its first sovereign credit downgrade in a decade. AB InBev plans to pass the increase on to customers and said the levy will cause the market to grow at a slower pace than it had estimated. The brewer controls about 67.5 percent of Brazil’s beer market.

The World Cup “provides an exciting opportunity to build brand equity and drive volume and revenue, not just in Brazil, but in many of our markets around the world,” the company said today. Budweiser is the beer sponsor of the tournament.

Group beer volume rose 4.5 percent in the first quarter, including an 11 percent increase in Brazil.

U.S. sales to retailers fell 2.6 percent, compared with an industry decline of 1.7 percent, as cold weather and a later Easter weighed on sales. Sales to wholesalers rose as AB InBev shipped beer ahead of labor negotiations at its breweries.

U.S. Economy

The brewer expects a boost from an improving economy in the U.S. this year, though said it may see a lower contribution to revenue growth from new products there in the next two quarters.

Quarterly volume in China rose 9.4 percent, while European sales fell 5.3 percent, dragged down by a 10 percent decline in Russia. Smaller competitor Carlsberg A/S cut its forecasts for earnings today, saying it expected a greater decline in Russia’s beer industry than previously forecast.

AB InBev’s earnings before interest, tax, depreciation and amortization rose to $3.88 billion, excluding some items, representing a so-called organic increase of 11 percent. The median analyst estimate was $3.91 billion.

To improve profitability, the brewer is selling more expensive beers and reducing costs in regions including Mexico, where it agreed to buy the rest of Corona maker Grupo Modelo SAB in 2012 for about $20 billion. It cut $120 million of expenses in the first quarter and reiterated a plan to deliver $1 billion in so-called synergies by the end of 2016.

Before it's here, it's on the Bloomberg Terminal.