AB InBev Net Profit Falls in Second Quarter -- 2nd Update

By Tom Fairless 

BRUSSELS--Anheuser-Busch InBev NV, the world's largest brewer, reported a sharp drop in net profit for the second quarter, as weakness in the U.S. and Brazil weighed on sales.

Leuven, Belgium-based AB InBev said Thursday net profit fell to $1.9 billion in the three months to end-June from $2.8 billion a year earlier, missing analysts' estimates. The brewer booked a loss of $139 million on derivatives used to hedge the price of shares it hands out as compensation to employees.

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

AB InBev's shares fell as much as 4.9% on the Brussels stock exchange before recovering some of the lost ground.

"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.

"We still have a long way to go to stabilize Budweiser's market share in the U.S.," AB InBev Chief Executive Officer Carlos Brito said on a call with analysts.

While advertising campaigns have helped to slow Budweiser's declining market share, Felipe Dutra, AB InBev's chief financial officer, said it was "a multiyear effort."

Sales in Brazil fell around 8% due to a weak economy and a comparison with a year-earlier period during which the country hosted the soccer World Cup tournament, Mr. Brito said. The World Cup effect accounted for around 5.5 percentage points of the decline, the brewer said.

In China, sales were "essentially flat" despite poor weather and "economic headwinds," the brewer said. Mr. Brito said he felt "good" about progress in the country this year, and that sales would improve with warmer weather.

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

AB InBev said it had completed a previously announced $1 billion share buyback program in June. "At this point we didn't feel necessary to launch a new program," Mr. Dutra said.

Write to Tom Fairless at [e-mail]

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