AB InBev's not toasting Brazil as brewer posts drop in profit and cuts revenue forecast

Rebecca Smith
Brazil spoiled ABInBev's merger party
Brazil spoiled ABInBev's merger party (Source: Getty)

Anheuser-Busch InBev has been celebrating the £79bn takeover of SABMiller earlier this month, but Brazil spoiled the party for its third quarter results.

The world's biggest brewer reported a surprise drop in third-quarter profit and cut its revenue forecast. And it's all Brazil's fault apparently - one of the brewer's most important markets.

Read more: AB InBev shares rise after swallowing up SABMiller

The figures

The Belgium-based maker of Budweiser, Stella Artois and Corona said adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) fell two per cent. Analysts had forecast 4.5 per cent growth.

Revenue also fell below estimates, growing 2.8 per cent on an organic basis.

The fizz was knocked out of AB InBev just a little, as it said it no longer expects sales growth to beat inflation in 2016 and cut its outlook for Brazil (for the second time this year).

Total volumes dropped 0.9 per cent for the quarter, with AB InBev's own beer volumes fell 0.2 per cent, predominantly due to a 4.1 per cent decline in Brazil. The brewer said this was due to "a weak industry".

Why it's interesting

Well, AB InBev has just completed a huge takeover SABMiller, combining to form the world's largest brewer and these results are a little underwhelming.

Ebitda in Brazil plunged 33 per cent, prompted by unfavourable foreign exchange hedges. Beer sales dropped for a fourth straight quarter in the country, which is AB InBev's second biggest market.

And it's not the only company struggling in Brazil. Higher taxes and a drooping economy, as well as the outbreak of the Zika virus have made for a tough climate. Danone and Unilever can also attest to this.

What ABInBev said

"Most of our markets delivered solid volume, revenue and EBITDA. However these results were negatively affected by a very weak quarter in Brazil, driven by the challenging consumer environment, a tough 3Q15 volume comparable, and the impact of unfavourable foreign exchange transactional hedges on cost of sales," said AB InBev.

Read more: Glass looks half full for AB InBev's Megabrew takeover of SABMiller

The brewer still had plenty to smile about though.

We are very pleased to have successfully completed our combination with SABMiller. The rationale is extremely compelling. It brings together two great companies to create the first truly global brewer, and one of the world’s leading consumer products companies. The combined company has a leadership position in most of the world’s largest profit pools, and a rich portfolio including seven of the top ten most valuable beer brands in the world.

We extend a warm welcome to our new colleagues and look forward to working with them to ensure a smooth integration.

Related articles