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Emerging Market Demand Boosts InBev's Earnings

InBev, the world's largest beer producer by volume, reported a 16.5% like-for-like rise in second-quarter core profit on Thursday, beating market expectations as demand grew in emerging markets.

InBev, whose key brands are Stella Artois, Beck's and Brahma, said EBITDA (earnings before interest, tax, depreciation and amortisation) came in at 1.23 billion euros ($1.67 billion), compared with the average 1.19 billion euro forecast from a Reuters poll of 13 analysts.

The company's results were partly known as Brazilian unit AmBev reported a 16% increase in EBITDA in mid-August.

InBev's other key areas of growth, Eastern European and Asia Pacific, were also
both expected to do well.

Revenue rose to 3.72 billion euros, a like-for-like increase of 7.6%, compared with the forecast of 3.68 billion. The much-watched EBITDA margin rose to 33.1% from 30.8% a year ago.

Volumes declined in mature markets North America and western Europe, but rose in Latin America, Asia Pacific and, by most, in eastern Europe.

Core profit grew in all regions, in part due to the company's zero-based budgeting cost drive.

InBev, whose production just exceeds that of SABMiller, gave no specific forecast, but said that it continued to see opportunties for further margin expansion and value creation.

It also announced it was buying back a further 300 million euros of its shares by October 2008, and said the buyback programme could be renewed again.

It follows the completion of a buyback announced on Feb. 1.

InBev shares trade at about 19 times projected 2007 earnings, on a par with SAB's multiple for earnings to March 2008, but behind Heineken at 22 times for 2007 and Carlsberg at around 23.

InBev shares have risen by 14% this year, compared with a 7% rise of the Dow Jones Stoxx food and beverage index, albeit not as much as Heineken, which doubled its growth forecast last month.

Heineken, the world number four, reported a higher-than-expected first-half operating profit on Wednesday, but warned of higher input costs and a declining pace of growth.