InBev maintains profit forecast despite weak growth

Related tags Cent Inbev Interbrew

InBev, the company formed last year by the merger of Belgium's
Interbrew and the Brazilian giant AmBev, says it is on track for
solid profit growth in 2004 despite missing its full-year volume
growth target, writes Chris Jones.

Total volumes increased by 60 per cent to 156.8 million hectolitres in 2004, with Interbrew's organic volumes up 3.3 per cent to 3.2 million hectolitres, below the 4-5 per cent target set by the company earlier this year.

Nonetheless, the group​ is predicting that turnover and profit growth will be in line with that of the first nine months of 2004 - 6.3 per cent and 9.4 per cent respectively.

Organic volume growth at AmBev has been 14.6 per cent since its merger with Interbrew, giving total organic volume growth of 6.4 per cent for InBev 2004, suggesting that the positive benefits of the merger are slowly beginning to be seen, according to analysts Goldman Sachs​.

AmBev had been struggling to recover from a poor performance in 2003 (volumes were down 11.6 per cent in the fourth quarter, for example) when it merged with Interbrew, and analysts were not totally convinced that the deal would bring immediate value to the Belgian brewer - fears which it now seems may have been unfounded.

Volumes in western Europe - primarily the UK and Germany - were down 2.3 per cent during the year, in line with the analysts' expectations, with British volumes affected by the company's decision to maintain the premium pricing for its flagship brand Stella Artois. The 3.3 per cent drop in Stella Artois volumes registered in the first nine months is expected to have increased for the year as a whole as a result.

In Germany, the strong performance of the Beck's family of brands was not sufficient to offset the volume decline of the other major brands in the portfolio, such as Hasseroeder.

In North America, organic volume growth was 3.0 per cent, led by stronger Beck's, Bass, and Stella Artois performances in the US import segment. However, this was less than the 4.8 per cent organic growth seen in the first half, reflecting the overall sluggishness of the US beer sector.

There was better news from central and eastern Europe, which continued to be a strong growth driver for the group with organic volume growth of 12.1 per cent, although again this was down from 14.9 per cent in the first half. Both Russia and Ukraine delivered strong volume and market share growth, and InBev also reported excellent performances in Bulgaria and Romania. GS suggested, however, that the group had also seen a downturn in Hungary and Croatia, although this is unlikely to be confirmed by InBev until March's full-year results.

Organic volume in the Asia-Pacific region rose 1.1 per cent, mainly due to the excellent organic volume growth in China, which more than compensated for South Korea's weak volumes, InBev said. The newly acquired Lion business in China performed ahead of expectations, the company said, while in Korea the switch of several brands to PET packaging helped the company increase its share of this more profitable segment to nearly 50 per cent.

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