London - Anheuser-Busch (AB) InBev [JSE:ANB] reported a surprise drop in third-quarter profit and cut its revenue forecast on a slump in Brazil, spoiling the Budweiser maker’s first set of results since it completed the $103bn takeover of SABMiller [JSE:SAB].
Adjusted earnings before interest, taxes, depreciation and amortization fell 2%, the Belgian brewer said in a statement on Friday.
Analysts expected 4.5% growth. AB InBev said it no longer expects sales growth to beat inflation in 2016 because of declining volume in Brazil. The shares fell as much as 6% in Brussels.
"This is the fifth disappointment in the last six quarters," Eamonn Ferry, an analyst at Exane BNP Paribas, wrote in a note to investors.
"One would have to seriously question a positive stance on standalone AB InBev. The thesis for us here is very centred on the acquisition of SABMiller."
Brazil, AB InBev’s second-largest market, is going through one of its most difficult years of the past decade and the fourth quarter will be tough, chief financial officer Felipe Dutra said on a call with reporters.
AB InBev joins Nestle SA, Danone and Unilever in wrestling with a consumer slump and inflation in that country. AB InBev also announced a drop in SABMiller's beer volume because of weakness in Africa.
SABMiller’s lager volume dropped 2% in the three months through September, also hurt by a transport strike in Colombia, according to AB InBev, which became Europe’s largest company by market value after the acquisition.
In the previous quarter, beer shipments were little changed.
AB InBev’s Ebitda in Brazil declined by 33%, driven by currency hedges linked to the impact of the devaluation of the real on the company’s costs.
The unfavourable hedge is expected to continue in the fourth quarter and ease in mid-2017, the company said.
Revenue dropped 6.8% in that market as the brewer delayed adjusting prices until the fourth quarter, AB InBev said.
Consumer prices rose 8.5% in Brazil in September year-on-year, and economists forecast 5% inflation in that market in 2017, according to a central bank survey published on Monday. AB InBev previously cut its forecast for Brazilian revenue in July, predicting unchanged sales.
AB InBev expects modest dividend growth in the near-term and has no plans to cut the pay out to below €1.60 per share, Dutra said.
The SABMiller results weren’t consolidated in AB InBev’s figures, and they excluded joint ventures and assets that were sold or are up for sale.
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