World Cup drinking gives AB InBev big boost

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Anheuser-Busch InBev1 Reuters. A waiter tastes a beer ahead of an Anheuser-Busch InBev shareholders meeting in Brussels April 30, 2014.

Brussels - The maker of Budweiser, Stella Artois and Corona beers experienced a sharp surge in sales in Brazil during the World Cup with the month-long contest leading to consumption of an extra 140 million litres or 2 million barrels.

Anheuser-Busch InBev, the world's largest brewer, said on Thursday this helped it to earn more than expected in the second quarter, along with strength in China and Mexico and an exceptional gain.

The company, which sold more than one in five beers drunk worldwide last year, also took advantage of Brazil's hosting of the soccer tournament to propel sales of soft drinks, which increased by far more than did beer sales.

Pepsi, which AB InBev bottles and distributes in Latin America, had fared well, as had the company's own caffeine-rich Guarana Antarctica, a sponsor of the Brazil soccer team.

Brazil, the company's second-largets market, accounts for more than two-thirds of the group's non-beer sales, themselves about a 10th of overall volumes.

Asia-Pacific and Mexican earnings were higher than expected, while increased marketing did cut into margin in Latin America North, including Brazil.

The brewer retained a forecast that the Brazilian and Mexican markets would return to growth this year due to the soccer tournament and stronger economies and that volumes in China would be solid.

The United States, AB InBev's largest market, would see an improvement due to a stronger economy, partly offset by an exceptionally cold winter that hit brewers in the first quarter.

The world's top brewers are relying on Latin America, Asia and Africa for growth amid subdued consumer spending in slowly recovering Europe and limited US expansion.

ONE-OFF GAIN INFLATES PROFIT

The brewer reported a 9.5 percent like-for-like rise in second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) to $4.85 billion (R52 billion).

The average forecast in a Reuters poll was $4.59 billion.

However, this year's figure was inflated by a $223 million one-off gain linked to US pension healthcare benefits along with $172 million from its recent acquisitions of Korea's Oriental Brewery and China's Siping Ginsber.

AB InBev shares began strongly, rising by as much as 1.7 percent, but were up just 0.3 percent at 12:45 SA time at 81.97 euros.

The STOXX European food and beverage index was off 0.8 percent, with Diageo down slightly after weakness in emerging markets.

“It's a solid performance, but not the blow-out it appeared to be at first sight,” said KBC Securities analyst Wim Hoste, who has an 'Accumulate' rating and 87 euro price target.

The group said higher prices and drinkers' shifts to premium products led to greater revenue, while cost control limited the impact of greater advertising and marketing expenses, much of it linked to the World Cup.

The company maintained its full-year outlook, except that it now saw distribution expenses rising by a mid- rather than a low-single-digit percentage, because of increased costs in Brazil, the United States and Mexico.

The increase in Brazil, it said, was due to a greater proportion of its own distribution and more than offset by higher revenues.

The company also said it remained committed to realising $1 billion of cost savings from taking full control of Mexico's number one brewer, Grupo Modelo, last year.

Savings to date have totalled $715 million. - Reuters


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