InBev, the world's largest brewer by volume, reported disappointing third-quarter figures as a wet European summer and changing tastes dampened thirst for its Stella Artois and Beck's beer, but it forecast a stronger end to the year.
The company's shares plunged 12.5 percent to a two-month low of 58.05 euros on Euronext Brussels, after it failed for the first time in nine quarters to beat analysts' forecasts.
"Overall our performance was below our expectations," Chief Financial Officer Felipe Dutra told a conference call. "Cost management programmes ... were key to offsetting weaker top-line results, mainly in the UK and China."
InBev, whose key brands are Stella Artois, Beck's and Brahma, said EBITDA (earnings before interest, tax, depreciation and amortisation) rose 8.5 percent on a like-for-like basis to 1.33 billion euros ($1.95 billion). Analysts had forecast on average 1.35 billion euros, based on a Reuters poll of 13.
Chief Executive Carlos Brito acknowledged the disappointment in a statement, but added: "We believe we have the commercial programmes in place to deliver a stronger fourth quarter." Beer volumes rose 3.6 percent in the July-September period.
Revenue rose to 3.78 billion euros, a like-for-like increase of 4.8 percent. The average analyst forecast was 3.82 billion euros. The much-watched EBITDA margin widened to 35.2 percent.
WESTERN EUROPE SLUMP: In key market western Europe, InBev suffered from poor summer weather that depressed volumes and pulled core profit down 13.2 percent to 226 million euros, against the average analyst forecast of 263 million.
Volumes fell 5.2 percent in Britain, 11 percent in Germany and 9.6 percent in Belgium. InBev also lost market share in Britain as sales of Stella Artois fell. Dutra said a key InBev priority was to bring the lager back on track, but acknowledged it would take time.
"Over time we deviated too much from the fundamentals of Stella as a brand in terms of quality and some other attributes," he said. Exane BNP Paribas cut its rating on the stock to Underperform from Outperform. "Compared to the competitors they seem to be losing ground. Western Europe is the clearest factor," said analyst Nikolaas Faes, adding Carlsberg had shown in figures on Wednesday that it was experiencing better volume developments.
The biggest boost came in Latin America, where core earnings in the larger northern region featuring Brazil increased by a better than expected 18.7 percent and in the southern region including Argentina by 32.6 percent, in line with forecasts.
In its other mature market, North America, core profit rose due to continued cost controls. In emerging markets, eastern Europe improved, while Asia Pacific produced similar earnings to a year earlier as investment rose. Dutra said the company had also suffered from fiercer competition across China and a lack of price increases despite rising commodity costs.
InBev, whose production just exceeds that of SABMiller Plc, said commodity price rises over recent months, especially for barley and malt, would impact 2008 cost of sales in all business units. However, risk management and efficiency programmes should ensure that consolidated cost of sales per hectolitre moved in line with average inflation next year.