AB InBev makes $1.55B in Q3, revenue down 10 pct

BRUSSELS - The world's largest brewer, Anheuser-Busch InBev SA, made $1.55 billion net profit in the third quarter as cost savings from last year's merger of Anheuser-Busch and InBev ran ahead of plan.

But revenue fell 10 percent as the recession led to people drinking less beer.

The maker of Budweiser, Stella Artois and Beck's did not give a figure for year-ago profit, saying Thursday it could not compare numbers from Anheuser Busch and InBev before they combined. In the July-September period in 2008, InBev made $690 million and AB $666.1 million.

The combined company, headquartered in Leuven, Belgium, sold 3.1 percent less beer in the three months ended Sept. 30, hit by weak worldwide markets as the economic downturn held back spending.

Revenue for the quarter was $9.76 billion, down from combined revenue from Anheuser and InBev of $10.89 billion before last November's takeover.

AB InBev's chief financial officer Felipe Dutra said he could not forecast when volumes would turn around. In real terms, the company expects demand to remain soft in the fourth quarter, predicting only an apparent improvement compared to a year ago because sales in 3Q 2008 were much stronger than 4Q 2008.

It also warns that administrative expenses will increase significantly in the fourth quarter as managers pick up higher bonuses than they did last year when business was suffering.

AB InBev CEO Carlos Brito said it was now "a much stronger company" after tackling debt with the $9.4 billion sell-off of U.S. theme parks and a central European unit — outpacing a goal to make $7 billion from divestments.

It has also made $875 million in cost savings from the takeover this year, nearing a goal of $1 billion. The company says it has also shaved at least $1 billion from capital expenditure from a year ago.

Paying off debt is still a priority, the company said, warning that it is still "selectively evaluating noncore assets" that could be sold off.

But it said it was no longer actively seeking to offload units and would "now focus all our efforts on growing our core business." Brito said this included new synergies not included in the $2.25 billion it plans to save from combining AB and InBev. He gave no new target.

The biggest problem AB InBev faces is reversing flatter beer sales — a problem other brewers also have.

SABMiller PLC, AB InBev's closest competitor and the maker of Grolsch, Peroni and Miller Genuine Draft reported that lager sales were down 1 percent in the six months ending Sept. 30. U.S. brewer Molson Coors said its worldwide beer sales fell 2.9 percent in the third quarter.

Dutra said the company was banking on rolling out Budweiser across the world as "a strong iconic U.S. brand."

"We clearly see the potential to bring that brand across the different markets where we operate where we have a strong sales and distribution platform in place," he told reporters.

Before the takeover, InBev relied heavily on sales growth in emerging nations — particularly Brazil where it sells more than three quarters of all beer and grew volumes 12.3 percent in the third quarter.

But this recession is also hitting demand in developing markets as AB InBev's focus on expensive premium brands causes it to lose out on sales of cheaper beer.

In Russia, sales slid 20 percent and will likely fall further if the government brings in a planned beer tax. Dutra said "if implemented, that will be bad for the market as a whole."

Volumes were down 16.8 percent in central and eastern Europe as a whole — including Russia and Ukraine — and fell 3.2 percent in Asia and 5.6 percent in Argentina and Chile.

This added to an expected decline in North American and western European sales, a gradually shrinking market as drinkers there shun beer for wine and spirits. U.S. and Canada volumes were down 4.7 percent and western Europe by 1.2 percent — down a sharp 7.1 percent in Germany.

Dutra said the company would spend more on sales and marketing to stoke growth. AB InBev is trying to boost U.S. sales by launching two new beers — a low calorie beer Select 55 and a wheat beer aimed at older drinkers, Bud Light Golden Wheat.

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