AB InBev sinks on missed estimates
ANHEUSER-BUSCH (AB) InBev shares plummeted as the brewer missed profit estimates for the sixth consecutive quarter, illustrating why it needed to spend $103 billion (R1.42 trillion) buying SABMiller.
The stock fell as much as 6 percent, the most since June. The drop imperilled the company’s position as Europe’s biggest company by market value.
The weakest link was Brazil where slack consumption was compounded by a delay in price increases into the fourth quarter. Shares of the company’s Brazilian unit, Ambev, led decliners on Brazil’s benchmark Ibovespa index.
The brewer also acknowledged that cracks were appearing in the US craft beer boom. More than ever, AB InBev would rely on achieving the $1.4bn of annual savings it said it could get from combining with SABMiller.
“One would have to seriously question a positive stance on standalone AB InBev,” said Eamonn Ferry, an analyst at Exane BNP Paribas.
The shares fell 4.1 percent at €107.50 (R1 629) as of 2.34pm in Brussels on Friday, cutting the company’s market value to about €217bn. Nestlé, which was displaced by the brewer as Europe’s biggest company by market capitalisation, is valued at the equivalent of $228bn. Ambev stock dropped 2.7 percent to 18.98 reais (R81.64) at 10.34am in São Paulo.
AB InBev also cut its revenue forecast, saying it no longer expected sales growth to beat inflation this year because of declining volume in Brazil.
Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 2 percent in the quarter, whereas analysts had expected 4.5percent growth.
AB InBev’s Ebitda in Brazil fell 33 percent, driven by currency hedges linked to the cost impact of the real’s devaluation. The drag was expected to continue in the fourth quarter and ease midnext year, the company said. Revenue dropped 6.8 percent in that market as the brewer delayed adjusting prices until the fourth quarter, AB InBev said.
Consumer prices rose 8.5 percent in Brazil in September year on year, and economists forecast 5 percent inflation in that market next year, according to the central bank.
The brewer also announced a 2 percent drop in SABMiller’s beer volume due to weakness in Africa and a transport strike in Colombia. In the US, AB InBev’s sales to retailers fell 3.8 percent in the quarter, more than the wider industry.
The SABMiller results weren’t consolidated in AB InBev’s figures, and they excluded joint ventures and assets that were sold or are up for sale.