InBev, the world's largest beer producer, beat expectations with an 18% rise in first-quarter core profit on growth in Latin America, but its shares fell as investors eyed its relatively high valuation.
The brewer of Stella Artois, Beck's, Brahma and Leffe achieved first quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of 962 million euros ($1.3 billion) compared with 812 million euros a year earlier.
Analysts had expected an earnings figure of 910 million euros and revenue of 2.96 billion euros, based on a Reuters poll of 16.
Turnover totalled 3.051 billion euros, a like-for-like increase of 9%, resulting in the much-watched EBITDA margin rising to 31.5%.
"They had a great run into these numbers and underlying expectations were for a substantial beat... The valuation is just looking a bit rich," said Michael Bleakley, analyst at Credit Suisse.
InBev shares were down 2.4% at 58.90 euros in morning trade, although they are still up 17% this year, versus a 9% gain for the Dow Jones Stoxx European food and beverage index. It was off 0.2% early Thursday.
"In principle it's good news," said Fortis analyst Sebastiaan Schreijen. He said Latin America and eastern Europe had grown stronger than expected. "But western Europe seems a bit of a problem child."
EBITDA in Latin America rose to 667 million euros, against analysts' expectations of 640 million euros, driven by a 5.1% rise in Brazilian beer volumes.
Performance in Western Europe
In its other main market, western Europe, core profit dropped 2.2% to 98 million euros, against analysts' expectations of a rise to 119 million.
Volumes fell 1.1%, while higher commodity costs hit earnings. British volumes fell 8.6%.
"We do not expect a significant change overnight (in Britain). That will take time. But again from April volumes were encouraging and we are back on track there," Chief Financial Officer Felipe Dutra told a media conference call.
He added InBev maintained its view that commodity prices would raise costs by some 120 million to 130 million euros.
InBev cut costs in western Europe by 118 million euros in 2006 by launching its zero-based budgeting savings plan there.
The programme was pushed into eastern Europe and South Korea in 2007. Dutra declined to give any details of first-quarter savings.
InBev said it remained committed to delivering organic growth ahead of the industry norm and revenue expansion above volume growth.
InBev shares trade at nearly 21 times forecast 2007 earnings, according to Reuters data, a premium to the sector because of its greater emerging market exposure. Heineken and SABMiller are at a multiples closer to 20.
Denmark's Carlsberg and Molson-Coors also reported market-beating results this week.