AB InBev Fourth-Quarter Profit Beats Estimates on Cost Savings

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Anheuser-Busch InBev NV (ABI), the world’s largest brewer, reported fourth-quarter profit that beat analysts’ estimates and more than doubled its dividend as cost savings exceeded the company’s target.
So-called normalized earnings before interest, tax, depreciation and amortization rose 25 percent to $3.9 billion in the three months ended Dec. 31. The median estimate of six analysts surveyed by Bloomberg News was $3.4 billion. AB InBev increased its dividend to 80 cents a share from 38 cents.
“The numbers seem reasonably good,” said Trevor Stirling, an analyst at Sanford C. Bernstein in London. “The big surprise for me is the doubling of the dividend.”
AB InBev, formed when InBev NV bought Anheuser-Busch Cos. in 2008, has pledged to save $2.25 billion by the end of 2011 as it closes breweries. Savings from the purchase in 2010 were $620 million, exceeding the company’s $500 million target, and the brewer aims to deliver at least a further $270 million in 2011.
AB InBev gained as much as 3.7 percent in Brussels trading and was up 1.09 euros, or 2.7 percent, at 41.26 euros at 12 p.m.
The dividend exceeded the 66-cent average estimate of 27 analysts compiled by Bloomberg. The payout level was increased as debt was cut by $5.5 billion to $39.7 billion in 2010, Chief Financial Officer Felipe Dutra said today on a conference call.

Debt Target
“We remain committed to bringing our net debt-to-Ebitda to below two times” by the end of 2012, Dutra said today, referring to the company’s normalized Ebitda figure. “We’re fully on track to get there.”
AB InBev said it expects the volume of beer sold globally to be “soft” in the first quarter as U.S. unemployment and heavy rains in Brazil drag on sales. The company sees “momentum building from the second quarter into the second half.”
Fourth-quarter revenue rose to $9.5 billion. Excluding acquisitions, sales growth was 5.9 percent, more than the 4.3 percent median estimate of eight analysts surveyed by Bloomberg. The volume of beer sold on the same basis rose 1.3 percent as higher sales in central and eastern Europe and Asia offset weakness in the U.S. and western Europe.
“Our financial results for 2010 showed very good progress in spite of the persistent challenging economic environment in several of our markets,” the company said today. “However, our culture is one of continuous improvement and there are several areas where we know we can still make progress.”

Outlook Unclear
The volume of beer sold in North America, where the brewer gets 44 percent of profit, slid 1.3 percent as high levels of unemployment in the U.S. weighed on consumption.
“The economic outlook for the U.S. obviously remains unclear,” Dutra said today. AB InBev “believes economic recovery in the U.S. is a question of when, and not if.”
The brewer raised prices in the country in September, leading to a loss of volume in its so-called “sub-premium brands.” The Bud Light, Stella Artois and Michelob brands increased market share. Budweiser’s share of the market dropped, though the decline “decelerated” toward the end of the year.
Fourth-quarter net income slid to $968 million from $1.28 billion a year earlier, the company said.
Volume at the Latin America North unit rose 3.4 percent as beer increased 3.5 percent and soft drinks gained 3.4 percent.

Brazilian Growth
The volume of beer sold in Brazil, the “main source of profit growth” outside the U.S., according to Bernstein, rose 11 percent in 2010 as the company started distributing beer in 1 liter bottles and sold products including Antarctica Sub Zero and Skol 360. AB InBev had an average 70.1 percent share of the Brazilian beer market, it said, although it lost 20 basis points of share in the fourth quarter compared with a year earlier as it increased prices ahead of its competitors, it said.
The volume of drinks sold in the Latin America South division rose 2.6 percent in the quarter. A 5 percent increase in beer volume offset a 1.3 percent decrease in soft drinks.
Fourth-quarter sales volume in Western Europe slid 3.6 percent, hurt by snowfall and icy conditions across the region. Beer volume slid 10 percent in Germany and Belgium amid “tough competitive conditions.” U.K. volume rose 2.4 percent.
Asia Pacific volume gained 8.4 percent in the last three months of the year, aided by 8.6 percent growth in China, where the company introduced its Budweiser Lime beer. AB InBev said on Feb. 14 it will acquire a 25 percent stake in Dalian Daxue Brewery Co. from Kirin Holdings Co. as part of a “strategy for expanding its footprint” in the world’s largest beer market.

The amount of Budweiser sold grew 1.7 percent in 2010, according to the brewer, and the brand expanded its market share in the U.K., China and Canada. The company aims to start selling Budweiser in Brazil in the second half of this year.
“Plans are in place, programs are in place — we are very excited about that opportunity,” of beginning to sell Budweiser in the country, CFO Dutra said. “The brand has stronger-than- expected brand awareness given the influence of the U.S. across all Latin American countries. Brazil is not an exception.”
Dutra declined to comment today on whether AB InBev plans to bid for the remaining shares in Grupo Modelo SAB, the largest Mexican beermaker, in which it owns a 50 percent stake.
Modelo appointed Dutra, CEO Brito and Sabine Chalmers, the brewer’s chief legal officer, to its board in November.
“We have been attending board meetings and interacting with Modelo’s management,” Dutra said. “We are very excited about building this relationship even further.”