InBev 3Q profit down nearly 14 pct. as costs soar

[November 06, 2008]  BRUSSELS, Belgium (AP) -- Brewer InBev SA on Thursday posted a nearly 14-percent drop in third-quarter profit as the cost of making and packaging beer soared.

The company said it still planned to complete its takeover of U.S. rival Anheuser-Busch by the end of the year without reducing or changing its offer -- despite the drop in Anheuser's share price. Together the companies would form the world's largest brewer.

Profit from July-September was 447 million euros ($575 million), down from 519 million euros a year ago. Total sales rose in the same period, by 7.7 percent to euro3.9 billion (US$5 billion).

InBev said costs -- above all for grain malt to make beer and aluminum for beer cans -- soared 12 percent during the three-month period compared to the previous year.

Chief Financial Officer Felipe Dutra said he expected these costs to ease in the fourth quarter compared to a year ago when prices first started to go up. The rise in input prices would ease next year, he said, and the company was also starting to hedge these costs.

Dutra also insisted that InBev was committed to its "binding deal" to buy Anheuser-Busch for $52 billion -- or $70 a share. Analysts have speculated that the company might renegotiate the deal because Anheuser shares slipped below that as stock prices tumbled in the recent financial turmoil.

Dutra told reporters that he did not anticipate or believe there would be any change to the capital structure or the agreed-upon conditions of the deal and the company would press on with its plan to fund it by issuing new shares.

InBev last month postponed a US$9.8 billion share issue that would pay for a large portion of the takeover, saying it would wait until markets stabilized.

Dutra said the company could launch the new shares up to six months after the Anheuser deal closed, saying he thought markets would be less volatile early next year.

Anheuser-Busch shareholders are due to vote on approving the takeover on Nov. 12. InBev shareholders cleared it in September. The deal also needs regulatory approval in the United States and the European Union before it could close by year-end.

InBev says it is well-positioned to deal with tough times ahead as the global economy slows. Dutra said the company's rapid growth in beer volumes would likely slow -- but lower costs would help the company's profits.

Beer industry analysts Plato Logic says beer sales will slow significantly to expand just 3 percent next year as economies around the world shrink or stagnate.

During the third quarter, InBev saw its rapid push into emerging markets slow, although its marketing drive helped it win back market share in difficult -- and lucrative -- richer markets Germany, Britain, Belgium and Canada.

It is spending more on sales and marketing as it focuses on a smaller number of key brands -- Stella Artois, Beck's and Leffe -- over its vast array of some 200 local beers. It said this strategy had "produced encouraging results." Global sales for Stella and Beck's rose 8 percent.

Its biggest Latin American market, Brazil, saw slow growth as beer drinkers -- faced with high food prices and bad weather -- kept their purses shut.

InBev also sold less beer in Russia and Ukraine as it quit the bargain beer sector in favor of premium beers. It said this shift "has not yet fully offset the decline in the more affordable brands" and the overall market was growing more slowly than expected.

[Associated Press; By AOIFE WHITE]

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