By Dow Jones Business News, February 27, 2013, 06:05:00 AM EDT
AB InBev Boosted by Rising Demand in U.S.
Anheuser-Busch InBev N.V. ( BUD ) said Wednesday Americans were drinking more beer again as demand in its main market
grew for the first time since 2008, while the brewer works on its push south with a multibillion-dollar deal for
Generating 40% of the brewer's operating profit and a third of its sales, the U.S. is by far AB InBev's largest and
most significant market. Blue-collar workers put the brakes on beer drinking during the recession, but higher employment
amid a nascent economic recovery has got households spending again. Domestic U.S. beer shipments were up 1.5% in the
three months to December, compared with a decline of 2% in the same period a year earlier, according to data from the
Beer Institute, an industry body.
As in most mature world beer markets, demand remains largely stagnant, but InBev's volumes grew for the first time in
four years, helped by the takeup of higher-margin craft brews, new beers like Black Crown, as well as higher-priced
ranges like Bud Light Platinum and pre-mixed Bud Light Lime-A-Rita, which kept the top line strong. The company also
said it has seen some customers shift back to beer from wine and liquor.
"We feel much better about U.S. trends," said Chief Financial Officer Felipe Dutra.
North America volumes increased 2.2% in the fourth quarter, excluding acquisitions and disposals, compared with 1.3%
growth in the third quarter and a fall of 4.5% in the same period last year. Revenue on the same basis rose 6.4%,
compared with 6.2% growth in the previous quarter.
Still, the world's largest brewer by sales warned of pressure on first-quarter U.S. volumes due to higher taxes, fuel
prices and a tough comparison with last year's mild winter, but Mr. Dutra doesn't expect the positive trend to reverse
over the year.
AB InBev is in talks with U.S. regulators to resolve antitrust concerns that threaten to derail its planned $20.1
billion takeover of Corona maker Grupo Modelo SAB (GMODELO.MX). The brewer has proposed selling assets and licenses
worth nearly $5 billion to Constellation Brands Inc. to calm fears the deal will shut out competition and push up
prices. Corona Extra is the best-selling imported beer in the U.S.
Legal action has been postponed until March 19 and Mr. Dutra doesn't expect an early resolution to the negotiations. "
It is very hard to speculate, but there is a lot of work being done. We see March 19 as the more likely date," said Mr.
Dutra, adding the group remains "excited" about the growth potential of the business. The benefits of a deal for Modelo
are considerable and in line with the company's record for high return on invested capital.
Mexico is one of several key destinations for AB InBev, and the deal with Modelo would allow it to push Budweiser and
Bud Light south while reaping benefits of selling Corona in California and Texas, among other markets. AB InBev also has
leading positions in Argentina and Brazil, its second most important market, and recently bought Dominican brewer
Cerveceria Nacional Dominicana SA for $1.24 billion.
North Latin America, which includes Brazil, saw fourth-quarter demand improve with volume growth of 3.5%, up from 0.1%
the previous quarter. But revenue growth slowed to 14.2% from 17.3% growth in the previous quarter, when higher prices
were pushed through.
Leuven, Belgium-based AB InBev has limited exposure to recession-hit Western Europe, where demand is falling, with the
U.K. and Germany alone accounting for more than half of its volumes in the region. Its Western European volumes dipped
3.8%, with revenue up 1.2% on higher prices. Overall global volume decline slowed to a fall of 0.1% after dipping 0.3%
in the previous quarter and 0.6% in the same period last year.
Net profit for the final three months of 2012 fell 5.1% to $1.76 billion, missing forecasts of $2.02 billion on losses
from currency movements, derivative contracts and commodity hedging costs. Revenue rose 4.2% to $10.29 billion. Full-
year net profit rose 23.7% to $7.24 billion while full-year revenue rose 1.8% to $39.76 billion.
Earnings before interest, tax, amortization and depreciation rose 9.9% to $4.39 billion, beating a $4.34 billion
forecast. AB InBev proposed a full-year dividend of 1.70 euros a share, up from 1.20 euros. The company is moving to
biannual dividend payments.
Write to Simon Zekaria at email@example.com
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