BUD Anheuser Busch Inbev SA NV

By Nick Kostov and Jennifer Maloney 

Anheuser-Busch InBev NV, the world's largest brewer, is eyeing further cost savings and won't pay bonuses to its top brass following a weaker-than-expected end to the year on a slump in Brazil.

The brewer said Thursday that savings from its $100 billion-plus megamerger with rival SABMiller will likely reach at least $2.8 billion compared with its earlier $2.45 billion estimate. This includes $1.05 billion in cost savings SABMiller said it would target before the merger was completed.

Adjusted earnings before interest, taxes, depreciation and amortization -- a measure watched closely by investors as a measure of the company's performance -- fell to $5.25 billion for the three months ended Dec. 31 from $5.62 billion a year earlier, missing analyst expectations.

The maker of Budweiser, Stella Artois and Corona posted both weaker sales and higher costs in Brazil, which is struggling to emerge from a two-year recession.

The year "proved to be one of the toughest years in our history of operating in Brazil," Chief Executive Carlos Brito said on a conference call with investors. Volumes in the region declined by 5.9% and revenue by 3.9%. He said the company continues to invest in its Brazilian project of returnable glass bottles, which cost less for consumers, and said he was "cautiously optimistic" about the industry rebounding there in the second half of 2017.

AB InBev said it won't pay bonuses to most of its senior management for 2016, including Mr. Brito and Chief Financial Officer Felipe Dutra.

The results were "even weaker than expected, not just in Brazil but also in Mexico and SAB's two biggest markets of Colombia and South Africa," said Trevor Stirling, an analyst at Bernstein.

AB InBev also is struggling to shore up flagging sales in North America, where volume fell 1.6% in 2016 as Americans have dropped mainstream lagers for smaller "craft" brands. It is attempting to reverse the decline of Bud Light, the country's top-selling beer, with a U.S. marketing campaign.

The company had expected sales to improve as a result of its National Football League sponsorship, including a rollout of team-themed cans last fall, but it didn't halt the slide of the brand's volume and market-share, Mr. Brito said.

"Turning around a brand the size of Bud Light takes time and requires discipline and we remain committed to doing exactly that," he said.

AB InBev completed its merger with SABMiller in October, making a huge bet that it could tap new growth in Africa and other emerging markets like Colombia and Peru. AB InBev said it had already captured $282 million of savings by Dec. 31 and expects $2 billion more within the next three or four years.

The latest quarter is the first time SABMiller's results have been consolidated in AB InBev's figures.

Net profit was $400 million for the three months to Dec. 31, down from $2.29 billion a year earlier. The drop was due in part to the increased cost of debt following the SABMiller deal and the negative impact from exchange-rate fluctuations.

Revenue rose 0.2% to $14.2 billion. Revenue per hectoliter rose 3.9%, helped by lower costs and the sale of more premium beer, while total beer volume fell 3.3%. Corona stood out with 14% revenue growth, performing especially well in Mexico, the U.K., Chile and China.

Excluding Brazil, adjusted earnings rose by 6.4% in the fourth quarter.

"It was a tough year but we remain committed to an attractive Brazil market and believe we have the right strategy to get the business back on track," Mr. Dutra said on a call with reporters.

The company's shares fell 2.5% Thursday.

For 2017, the company expects revenue growth to accelerate. It said it would pay a final dividend of EUR2 (about $2.10) a share, bringing the total dividend for 2016 to EUR3.60, in line with previous years.

Write to Nick Kostov at Nick.Kostov@wsj.com and Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

March 03, 2017 02:47 ET (07:47 GMT)

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