AB InBev Records Better Than Expected Q1, Foresees World Cup boost
Anheuser-Busch InBev, the world's largest brewer, forecast faster growth in the rest of the year helped by the soccer World Cup after strong earnings in most of Latin America outweighed US weakness at the start of 2018.
The maker of Budweiser, Stella Artois and Corona had forecast a soft first quarter, but has now revealed that it went slightly better than expected and that growth should accelerate through the year, primarily in the second half.
Chief financial officer Felipe Dutra said AB InBev was confident of a return to volume growth in Brazil, its second-biggest market, in the second quarter with more drinking driven by its sponsorship of the World Cup in June and July.
Dutra said the event could increase annual volumes in Brazil and Argentina by 0.5 to 1 percentage point as matches boosted beer drinking in normally fallow winter weekdays.
First-quarter core profit (EBITDA), the figure most watched by markets, rose by 6.6% to $4.99 billion, just above the average forecast in a Reuters poll of $4.98 billion.
The rise included the benefit of $160 million of savings following its near $100 billion purchase of SABMiller, bringing the total to date to $2.29 billion. AB InBev is targeting $3.2 billion from the deal that has added Latin American countries and extended its reach to Africa.
RBC Capital Markets described the company's performance in the quarter as good "relative to subdued expectations", with Mexico, Colombia and Argentina very strong.
Beer volumes grew in those three large markets, but declined in the United States, its biggest market, and Brazil. However, profits rose in the latter due to higher prices and lower costs.
AB InBev had warned first-quarter growth would be limited due to higher sales and marketing spending in advance of the World Cup and because the start of 2017 was comparatively strong.
In Brazil, the brewer said an earlier Carnival brought to an end sooner the traditional summer drinking season, with cold and wet weather a further drag.
However, the company got consumers to pay more for their beer and, together with tight cost control and a stronger Brazilian real, earnings and margins there improved.
In the United States, price hikes and a consumer shift to more expensive lagers could not offset the volume decline, with both Budweiser and Bud Light losing market share. A rise in the price of hedging aluminium and increased freight costs led to margin contraction and a 5% profit decline.
AB InBev said it was committed to improving its top and bottom line in the United States.