AB Inbev misses earnings estimates

ANHEUSER-Busch (AB) InBev, the world’s largest brewer, has missed second-quarter earnings estimates, selling less beer and spending more on distributing and marketing new US brands.

The maker of Budweiser, Stella Artois and Beck’s forecast a better second half yesterday after posting a second-quarter 2.5% like-forlike rise in earnings before interest, taxes, depreciation and amortisation to $3.59bn, below the $3.74bn average in a poll.

Overall group beer volumes fell by 0.5%, in contrast to rival SABMiller which benefited from its presence in Poland, a host of the Euro 2012 soccer tournament, to sell 5% more in the quarter.

AB InBev’s shipments fell to wholesalers in the US, where its market share is almost 50%.

Marketing costs also increased on new US brands — including a 6% Bud Light Platinum beer and margarita-flavoured Lime-A-Rita — and the company spent more to transport beer across both the US and Brazil.

AB InBev chief financial officer Felipe Dutra admitted the second quarter had been “challenging”.

“However, we are confident about the momentum we have in our top three markets — US, Brazil and China — and look forward to a stronger second half compared to the first half,” he said.

AB InBev shares were down 3.6% yesterday morning and were among the weakest in the FTSEurofirst 300 index of leading European stocks.

“They’ve had higher distribution expenses, increased cost of goods sold and some market share losses.… They’ve shown they are human. It’s a weak quarter,

We are confident about the momentum we have in our top three markets … and look forward to a stronger second half

although it’s not a disaster,” ING analyst Gerard Rijk said.

AB InBev shares are still up 35% in the year to date, double the rise in the STOXX European food and beverage index.

The company said US shipments to wholesalers would grow in the third and fourth quarters and that distribution costs should decline in the second half.

“It’s below expectations, but most of these things are related to this quarter and will reverse or fade in the second half,” said Bernstein analyst Trevor Stirling.

The Americas represent 75% of AB InBev’s revenue and more than 85% of earnings. That will increase after its $20.1bn buyout of Mexico’s Grupo Modelo agreed last month.

AB InBev has almost 50% of the beer market in the US, the world’s second biggest after China, and nearly 70% in Brazil.

Its strategy has been based on selling more beer in emerging markets, notably Brazil, and persuading US drinkers in particular to pay more, by increasing prices or shifting to premium brands.

It also hiked prices in Brazil last year to keep ahead of inflation and to tap a 7% real increase in the minimum wage this year.

The Belgian-based brewer is the second global player to report on the April-June period after SAB Miller. Carlsberg reports secondquarter results on August 15 and Heineken on August 22. Reuters