AB InBev Net Profit Falls in Second Quarter -- Update

By Tom Fairless 

BRUSSELS-- Anheuser Busch InBev NV Thursday said its net profit fell in the second quarter, missing analysts' expectations as weakness in the U.S., Europe and Brazil weighed on sales.

AB InBev, the world's largest brewer, said net profit fell to $1.9 billion in the three months to end-June from $2.8 billion in the corresponding period a year earlier.

Revenues for the maker of Budweiser, Corona and Stella Artois fell sharply to $11.1 from $12.2 billion a year ago. The brewer attributed the decline to poor weather and weak economic conditions in a number of key markets, as well as a tough comparison with a year-earlier period that included the soccer World Cup in Brazil.

The brewer also booked a loss of $139 million on derivatives used to hedge the price of shares it hands out as compensation to employees.

AB InBev's shares fell 4.5% in early trading on the Brussels stock exchange.

"All in all the [result] was below the market's estimates on volumes, top line, the operating result and the bottom line, admittedly on difficult" comparisons with the year-earlier period, wrote Hans D'Haese, an analyst at Bank Degroof, in a note to clients.

The brewer's performance in the U.S., which accounted for around a third of total revenue last year, continues to weigh on profit.

Several of its flagship brands, including Budweiser and Bud Light, are still losing market share in the country. The brewer has been struggling for years to adjust to changing tastes as U.S. consumers increasingly favor craft beers over AB InBev's mass-market lagers.

"In the U.S., the high-end segment is growing faster than the overall" beer market, Felipe Dutra, AB InBev's chief financial officer, told reporters on a conference call. He said the brewer has around 16% of the premium U.S. beer market, which is "materially lower" than its roughly 48% share of the wider U.S. market.

While advertising campaigns have helped to slow the decline of Budweiser's market share, Mr. Dutra said there was "still a long way to go."

"We are not there yet, it's a multiyear effort," he said.

Sales in Brazil fell by around 8% due to "an unfavorable macroeconomic environment" and a comparison with a year-earlier period during which the country hosted the soccer World Cup tournament. The World Cup effect accounted for around 5.5 percentage points of the decline, the company said.

In China, sales were "essentially flat" despite poor weather and "economic headwinds," the brewer said.

A bright spot was Mexico, where sales rose around 4%, and beer volumes also grew in Argentina and Canada

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