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AB InBev sees return to growth in Brazil with World Cup boost

Zoom in font  Zoom out font Published: 2014-02-27  Views: 12
Core Tip: Anheuser-Busch InBev, the world's largest brewer, forecast the Brazilian and Mexican beer markets would return to growth this year due to the soccer World Cup and stronger economies
Anheuser-Busch InBev, the world's largest brewer, forecast the Brazilian and Mexican beer markets would return to growth this year due to the soccer World Cup and stronger economies, but cautioned about higher input and marketing costs.

The maker of Budweiser, Stella Artois and Corona said the World Cup would boost beer sales by 1 to 2 percentage points in Brazil, its second-largest market which shrank last year due to a wet summer and high inflation that sapped disposable income.

AB InBev also said on Wednesday stronger economic growth would drive Mexico and its biggest market, the United States in 2014. The latter, though, would suffer in January and February as exceptional cold weather and snow meant fewer people went out to bars.

"Where weather has been good, for example the west coast, volumes have been fine," Chief Financial Officer Felipe Dutra told a conference call.

However, there were notes of caution.

The firm said its cost of sales per volume would increase by a low single-digit percentage as the effect of unfavourable exchange rates, principally the Brazilian real's weakness to the dollar, outweighed lower global commodity prices.

AB InBev also said it would be raising its spending on sales and marketing by a low to mid-teen percentage, including World Cup-related promotions and investment in its newer brands.

AB InBev, which sold more than one in five beers drunk worldwide last year, said volumes slipped 1.7 percent in the final quarter of 2013, but revenue rose 4.6 percent to $11.71 billion, a little below the average $11.77 billion expected in a Reuters poll.

The company reported a 13 percent like-for-like rise in fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA) to $5.20 billion, higher than the $4.94 billion average in a Reuters poll.

The figure included a $143 million one-off gain related to the recovery of funds from a pension plan in Brazil, although even excluding that it was still above the market consensus.

The improvement came from price hikes and a shift to premium lagers that meant higher revenue per litre, savings since taking full control of Mexican brewer Modelo and general cost control.

AB InBev shares were up 0.8 percent at 74.85 euros at 0820 GMT, within a flat STOXX 600 food and beverage index.

"On the cost side they've got some both external and self-imposed headwinds, which I would have thought people would have to reflect in their forecasts," said Andrew Holland, beverage analyst at Societe Generale.

The world's top brewers are relying on Latin America, Asia and Africa for growth amid subdued consumer spending in austerity-hit Europe and limited U.S. expansion. However, growth in several developing countries, disappointed last year.

For AB InBev, a wet summer, an early Carnival and high inflation depressed volumes in Brazil, where it has some two-thirds of the market, second only to the United States in terms of profit. Volumes also slipped in Mexico due to a softer economy and harsh weather in September. The only region registering growth for the company in 2013 was Asia.

AB InBev's view of the year ahead after soft spots in 2013 echoes those of its brewing peers.

World number three Heineken forecast a return to revenue growth this year and Carlsberg, the world number four, saw profit growth in the year ahead with higher beer sales in emerging markets.

AB InBev stuck to its forecast of $1 billion of synergy gains from Modelo before the end of 2016, although it expects to achieve most of that a year earlier. Including savings found before the deal closed in June, the Belgium-based company has already achieved $460 million of its target.

 
 
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