China sales boost AB InBev profit

[August 11, 2011]  BRUSSELS (AP) -- The world's largest brewer Anheuser-Busch InBev NV said Thursday that second-quarter profits rose by more than a quarter as higher sales in China made up for declining demand in the U.S. and Brazil.

The Asian-Pacific region, led my China, is now AB InBev's third biggest market, cushioning the brewer from difficult economic conditions in its traditional sales bases.

Beer volumes in China, where AB InBev is pushing its Budweiser as well as Harbin and Sedrin brands, rose 12 percent in the second quarter, compared with a year earlier.

The strong performance in China helped swell the company's net profit to $1.45 billion from $1.15 billion, while revenue increased 8.5 percent to $9.52 billion from $9.17 billion.

Profit was also lifted by lower expenses on tax and financing and the weakness of the dollar, since AB InBev generates much of its sales in currencies other than the dollar.

Overall, the results and the company's outlook, which predicted growing volumes in the second half, were in line with expectations, said Wim Hoste, analyst with KBC Securities.

AB InBev's shares nevertheless dropped 1.5 percent in early trading.

The Leuven, Belgium-based company said it managed to increase sales volumes compared to last year, even though the year-earlier quarter was boosted by the soccer Wold Cup.

However, the sharp sales growth in China, which Finance Chief Felipe Dutra called "an exciting and growing market," masked volume declines in the U.S. and Brazil.

"China has over the last couple of quarters really turned into quite a good story for them," said KBC's Hoste.

In the U.S., the company blamed high unemployment for falling volumes. Joblessness has been especially high among young men, their key consumer group.

"We are all monitoring what is happening in the economy and politics," Dutra said.

Poor weather, high gas prices and falling sales of the company's cheaper beers also hurt volumes in the U.S. and Canada, which were down 1.5 percent in the second quarter.

AB InBev has been cutting the price difference between its so-called sub-premium and premium brands, and Dutra said that strategy had succeeded in boosting market share for AB InBev's more expensive beers.

In Latin America North, home to AB InBev's second biggest market Brazil, volumes dropped 2 percent, a decline that Dutra blamed was linked to last year's exceptionally high growth when second quarter sales were helped by the World Cup.

In Europe, strong sales in Germany as well as the company's home market Belgium made up for a steep decline in the U.K., where year-earlier results had also been pushed up significantly by the World Cup.

Even though the weak dollar helped profits, it is driving up the value of its debt, said AB InBev, which took on a lot of debt when it bought America's Anheuser-Busch in the summer of 2008.

[Associated Press; By GABRIELE STEINHAUSER]

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