AB InBev sees flat beer sales

[March 04, 2010]  BRUSSELS (AP) -- The world's largest brewer and maker of Budweiser reported Thursday a fourth quarter profit of $1.28 billion, helped by cost cuts and price hikes, but said global beer sales were stagnant and forecast no rebound in 2010.

Anheuser-Busch InBev SA sold 0.7 percent less beer and soft drinks in 2009 during the economic downturn and says that global beer demand is neither growing nor shrinking.

"We see no improvement in the operating environment today," the company's chief financial officer Felipe Dutra told reporters.

Other brewers Heineken and SABMiller have also reported flat or falling beer sales for some or all of last year.

AB InBev chief executive Carlos Brito said he was hopeful that lower sales across the world were a "one-year event" triggered by the financial crisis and that emerging economies would return to growth, even if developed markets, above all in western Europe, remain in decline.

"We think that this thing will be sorted out and when it's done, markets will at some point go back to their original trend," he said. "We continue to be very bullish in the U.S. but recognize that until the economy gets better, we're going to have some tough years."

He was less optimistic about Europe, where people are buying fewer alcoholic drinks, turning from beer to other products and visiting bars less often, saying "as an industry, we haven't really cracked that code."

In the United States, the company's biggest market, beer volume sales were down 2.1 percent last year -- even though revenues grew 0.6 percent. Volumes were also down by 13.1 percent in Russia, 4.9 percent in western Europe and 2.4 percent in China.

Despite the economic downturn, America's topselling beer Budweiser is gaining ground in new markets, the company said. Sales of the beer grew 12.1 percent in China last year and Brito said it is "growing nicely" in Britain and parts of South America.

"It's a brand that we continue to intend to push in different markets, it's amazing to see how the brand is recognized by consumers just by the very fact of its sponsorships ... the Olympics, the World Cup and a lot of the American sports that are seen and watched more and more around the world," he said.

Brito said the company was preparing for a surge in beer demand for this summer's soccer World Cup: "It's a beer event and that's why we sponsor it."

AB InBev said the $1.28 billion profit for the three months ending Dec. 31 was some 17 percent lower than the third quarter but far higher than the $29 million it reported a year ago.

Revenues in the fourth quarter were $9.29 billion, down from $9.76 billion in the third quarter but up nearly 4 percent from $8.96 billion in 2008's fourth quarter. Fourth-quarter volumes climbed 1 percent from a year ago.

For all of 2009, AB InBev made a profit of $4.6 billion and had $36.76 billion in revenues.

AB InBev said in a statement that global demand for beer "remains relatively resilient." It warned that first quarter volume sales may suffer from the cold weather in the U.S. and alcohol tax hikes in Russia.

The brewer said it now depends on emerging economies for about half of its revenue and most of its volume sales. It is the market leader in the U.S. and in Brazil.

It said it would focus on growing its business after a tough year of cost-cutting and deleveraging. Debt paydown is still a top priority, it said, and would be funded by generating "significant free cash flow."

AB InBev has spent the last year struggling with the aftermath of a $52 billion takeover in July 2008, just weeks before the financial crisis sent debt costs soaring.

The company said it has now managed to extend some $20 billion in outstanding debt and this month obtained $17.2 billion in long-term bank financing to fully refinance the takeover debt.

It has also shaved some $1.1 billion from operating costs as it merged the two companies and has made $9.4 billion from selling off InBev's South Korean beer unit, Anheuser-Busch's theme parks and units in Britain and China. It said it has no plans to divest anything else.

The company said it last year added $787 million in working capital and reduced capital expenditure by $1.5 billion. It has some $1.7 billion to spend on major projects this year, it said.

[Associated Press; By AOIFE WHITE]

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