* First core profit decline since InBev formed in 2004
* Q4 EBITDA $5.25 bln vs Reuters poll $5.58 bln
* Recession hits Brazil beer sales, weak real hikes costs
* Raises merger savings target to $1.75 bln from $1.4 bln
(Adds shares, analyst comment)
By Philip Blenkinsop
LEUVEN, Belgium, March 2 Anheuser-Busch InBev
, the world's largest brewer, suffered its first decline
in core earnings since its formation over a decade ago as
recession-hit Brazil depressed beer sales by even more than
The brewer of Budweiser, Stella Artois and Corona, which
makes more than a quarter of the world's beer, highlighted
difficulties it faces in Brazil, its second largest market, with
both lower sales and increased costs due to the weaker real.
The company, which paid nearly $100 billion to take over its
nearest rival SABMiller last year, reported its first decline in
annual core profit (EBITDA), its key earnings measure, since
InBev was founded by the merger of Belgium's Interbrew and
Brazil's AmBev in 2004.
AB InBev shares were down 1.7 percent shortly after the
opening bell, making them among the weakest performers in the
FTSEurofirst 300 index of leading European blue-chip stocks.
Andrew Holland, beverage analyst at Societe Generale, said
fourth-quarter earnings missed market consensus at earnings per
share level and to a lesser degree for EBITDA.
"We all knew that Brazil was going to be a basket case again
because they told us so, it's still even more of a basket case
than everyone was anticipating," he said.
AB InBev acknowledged that its market share in Brazil had
declined in 2016. Last month, Heineken agreed to buy
the loss-making breweries in Brazil of Japanese company Kirin
Holdings Co Ltd to become the second largest beer maker
AB InBev, now more than double the size globally of nearest
rival Heineken after completing the SABMiller deal in October,
recognised its performance last year was disappointing and said
most of its executive board would not receive bonuses.
It also raised its forecast for merger savings to $1.75
billion from $1.4 billion before. That excluded the $1.05
billion SABMiller had already earmarked before the merger. A
number of analysts had been expecting an increase.
AB InBev said it had already captured $829 million of
savings. The balance of about $2 billion would come in the next
three to four years.
Core profit (EBITDA) fell 3.6 percent on a like-for-like
basis and excluding currency impact in the fourth quarter to
$5.25 billion, well below the $5.58 billion expected in a
Reuters poll of eight analysts.
Excluding Brazil, AB InBev said its core profit in the
fourth quarter would have risen 6.4 percent. For the year as a
whole, its beer sales would have fallen by 0.1 percent, rather
than the 1.4 percent decline reported.
AB InBev beer sales also declined in North America and
Europe in the final quarter, but profits grew due to more
expensive brands being sold, while Chinese earnings slipped.
(Reporting by Philip Blenkinsop; editing by Keith Weir)