Anheuser-Busch InBev, the world’s biggest brewer, reported sales growth that topped analysts’ estimates as demand for beer surged in Brazil, boosting confidence in one of its largest markets.
Revenue rose 8.9%, excluding the impact of currency shifts and acquisitions, the Leuven, Belgium-based company said today in a statement. Analysts had anticipated a 6.4% advance on that basis.
Earnings before interest, tax, depreciation and amortization rose to $3.88 billion, excluding some items, representing a so-called organic increase of 11% as the company boosted investment ahead of this year’s soccer World Cup in Brazil, which it’s sponsoring.
Brazilian volume rose 11% due to good weather and lower food inflation, which freed up disposable income for consumers. The Budweiser maker reiterated that it expects a return to growth in the country, where it controls two-thirds of the market, aided by its sponsorship of the World Cup. Still, the shares fell slightly as profitability in some of the brewer’s main markets fell short of estimates.
“We suspect the market will focus more on the negatives, short-term,” analysts at Citigroup Inc. wrote in a note today. “Margins in three key markets were below expectations,” they said, citing higher marketing spending in the US and Brazil.
AB InBev shares were down 0.7% at 76.11 euros as of 9:26 am in Brussels trading.
‘Exciting Opportunity’
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, after spending 17% more on sales and marketing investments in the quarter ahead of the tournament’s start.
Brazil’s government will raise taxes on beverage sales from June 1, it said in April, to increase revenue after suffering its first sovereign credit downgrade in a decade. AB InBev said today it will pass tax increases on to customers, and that the levy is a “headwind” that will cause the market to grow at a slower pace than it had estimated.
The quantity of beer sold by AB InBev rose 4.5% in the quarter compared with the 2% median estimate.
Sales in China advanced 9.4% on a good performance over the Chinese New Year.
Improving Economy
US sales to retailers fell 2.6%, the company said, compared with an industry decline of 1.7%, as cold weather and a later Easter weighed on sales. Sales to wholesalers rose as it shipped beer ahead of labor negotiations at its breweries in the country. AB InBev expects a boost from an improving economy in the US this year, it said.
To improve profitability, AB InBev 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.
“We have confidence in the long-term potential of our brands and are encouraged by the strong start to the year,” AB InBev said in the statement.
Bloomberg
