AB InBev Boosts Profit but U.S. Struggles Continue -- Update
By Nathan Allen and Ian Walker
Anheuser-Busch InBev SA, the world's largest brewer, posted a strong rise in fourth-quarter net profit Thursday, but its key beer brands continued to struggle in the U.S.
Shares in the company rose more than 5% after it said it expects strong earnings growth in 2018, boosted by expected synergies of just over $1 billion in the next two to three years related to its acquisition of SABMiller.
The robust results were driven by a rebound in Brazil, the company's second-biggest market. However, it said the first quarter is likely to be weak, in part because of an early end to Carnival season in the Latin American country.
The Belgian brewer's Budweiser and Bud Light brands lost further market share, further illustrating the challenge AB InBev faces in turning them around. Both brands have struggled amid a shift across the U.S. toward craft beers, Mexican imports, wine and spirits.
In response, AB InBev has invested heavily in small-brewery beers it brands as craft, as well as foreign labels like Stella Artois and its higher-end light lager Michelob Ultra.
Analysts were nevertheless optimistic on the company's outlook and performance. Liberum and Jefferies analysts reiterated their buy ratings, pointing to management's confident tone and dividend payment.
"The country that delivered an outstanding performance was Brazil, where AB InBev's business recovered well throughout the year and delivered its strongest results in the fourth quarter," analysts at Bryan Garnier said.
AB InBev said its net profit for the fourth quarter was $3.04 billion, compared with $400 million a year earlier, when the company was hit by an increase in the cost of debt related to the SABMiller deal. Revenue rose to $14.60 billion from $14.20 billion.
Total volumes sold rose 1.6% in the quarter to 146 million hectoliters, with own-beer volumes 2.3% higher at 126.8 million hectoliters.
Among AB InBev's major brands, global revenue from Budweiser grew 4.1% in 2017, while Stella Artois and Corona posted gains of 13% and 20%, respectively, the company said.
The board announced an unchanged final dividend of EUR2 ($2.44) a share, taking the total payout for the year to EUR3.60 a share.
Concerns that the brewer may need to cut its dividend to reduce leverage ahead of its proposed acquisition of Turkey's Efes are overblown, according Liberum, which says the company's cash flow is sufficient to increase the payout to shareholders in the coming years.
Write to Ian Walker at firstname.lastname@example.org
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March 01, 2018 06:53 ET (11:53 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.