The world’s largest brewer, Anheuser-Busch InBev, reported higher than expected profit growth in the first quarter, and said there were signs of a turnaround in Brazil, its second biggest market, after a two-year slump.
Beer volumes finally picked up in Brazil in January to March, the brewer said on Thursday, although it had not fully passed on the cost of 2016 tax increases to consumers and sales costs rose due to a near 40 per cent decline in the real against the dollar.
The maker of Budweiser, Stella Artois and Corona, which produces more than a quarter of the world’s beer, said it expected cost of sales per hectolitre in Brazil to fall later in the year. Half of its sales costs in Brazil are dollar-denominated.
“We remain cautiously optimistic on Brazil overall. We expect 2017 to be better industry-wise than 2016,” chief financial officer Felipe Dutra told a conference call.
Mr Dutra recognised that the US beer market, the company’s largest, had also performed below expectations, but also talked about the year as a turning point for the company overall.
Currency changes
AB InBev said overall first-quarter core profit rose 5.8 per cent on a like-for-like basis, excluding currency changes and the impact of its merger last year with SABMiller. That was above the 3.3 per cent foreseen in a company-compiled poll.
AB InBev, which sells more than twice as much beer as nearest rival Heineken following its $100 billion (€91bn) acquisition of SABMiller, retained its forecast of accelerated revenue growth this year.
Morgan Stanley said in a note that the brewer’s first-quarter results were a relief after a tough 2016, and represented an inflection point with year-earlier comparisons easier for the rest of 2017.
Mr Dutra said the North American beer market had performed below expectations, but was comparing with a leap year and an earlier Easter in 2016.
In the United States, AB InBev saw lower volumes as Bud Light and Budweiser both lost market share. Profit also slipped, although the margin increased with strong sales of higher-priced Michelob Ultra, Stella Artois and craft beers.
Positives
Among the positives were increased volumes and earnings in Mexico, a huge expansion of margins in South Africa, one of its new markets, higher earnings in Europe and a strong start to the year in China.
AB InBev also reported further cost savings of $252 million (€230.7m) from its integration with SABMiller.
“It’s very much a mixed picture,” said Trevor Stirling, analyst at Bernstein Securities, citing weakness in Brazil an the United States. “On the other hand the synergies are coming through.” – Reuters
