By Matthew Dalton and Tripp Mickle
BRUSSELS--Anheuser-Busch InBev NV said on Wednesday a
derivatives gain pushed its net profit sharply up in the first
quarter, helping offset weak U.S. results and the impact of a
strong dollar on revenue from the rest of its global beer
empire.
Excluding the currency impact, AB InBev's revenue jumped around
6%, well exceeding expectations. That was mainly because of Brazil,
where the company managed to boost profit despite the country's
economic woes.
AB InBev, the world's largest brewer by market share, said net
profit jumped to $2.68 billion in the first quarter, from $1.37
billion in the same period a year ago. The brewer booked a gain of
$757 million on derivatives used to hedge the price of shares it
distributes as compensation to employees.
Revenue fell slightly, to $10.45 billion from $10.61 billion a
year ago, a decline the group attributed to the strong dollar,
which lowered revenue by about $1 billion. Sales in the U.S. also
were weak, as the company a year ago had built up stocks ahead of
negotiations with U.S. labor unions and job cuts last year.
But strong results in Brazil, China, Argentina and Chile helped
buoy revenue and comforted investors. AB InBev's shares rose 1.1%
in trading on the Brussels stock exchange.
The quarter in Brazil was exceptionally strong, analysts said.
Beer volumes sold were flat, even though Brazilian beer production
data released after the first quarter ended showed volume declines
of 5% to 7%. And revenue rose nearly 11% excluding the impact of
the strong dollar.
Chief Executive Carlos Brito said the increase stemmed from
double-digit growth of higher-priced brands such as Budweiser and
Bohemia and an increase in the percentage of beer AB InBev directly
distributes. The company said it expects net revenue in Brazil to
grow in the mid- to high-single digits this year.
"Our guys in Brazil decided they would not be part of the bad
mood that was in some of the industries in Brazil," Mr. Brito told
analysts. "We decided to keep our head down, focus on execution and
out execute competition in the marketplace."
He added that "the fundamentals in Brazil remain the same--the
weather, the beer culture, the middle class; all the things are
there."
But some analysts questioned whether the company's sales volumes
would converge toward the production data as the effects of the
company's revenue-boosting measures fade.
"It was a blowout quarter in Brazil but that also raises
suspicion of how sustainable it might be," said Javier Gonzalez
Lastra, an analyst with Berenberg in London.
Another bright spot was China, where revenue surged around 15%,
fueled by a Budweiser marketing campaign unveiled around the Lunar
New Year. Revenue boosting measures succeeded in Argentina, while
the introduction of Corona in Chile raised revenue there.
But AB InBev's performance in the U.S., which accounted for 34%
of total revenue last year, continued to weigh on profit.
Even excluding this effect, AB InBev's performance in the U.S.,
its largest market, continued to disappoint.
Several of its flagship brands, including Budweiser and Bud
Light, are still losing market share in the U.S. The brewer has
been struggling for years to adjust to changing tastes: U.S.
consumers increasingly prefer craft beers over AB InBev's
mass-market lagers.
Felipe Dutra, AB InBev's Chief Financial Officer, said
advertising campaigns unveiled by the brewer this year have helped
slow the decline in Budweiser's market share.
"We have a long way to go to stabilize the share of Budweiser,
but the year is off to a good start," Mr. Dutra said.
Budweiser's sales outside the U.S. have continued to rise,
fueled by strong demand in China, Brazil and even the troubled
Russian market, he said.
Write to Matthew Dalton at Matthew.Dalton@wsj.com and Tripp
Mickle at Tripp.Mickle@wsj.com
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