AB InBev sees strong 2018 growth after Brazil rebound

By Philip Blenkinsop

LEUVEN, Belgium(Reuters) - Anheuser-Busch InBev, the world's largest brewer, forecast strong revenue and profit growth this year after Brazil's rebound led to higher than expected earnings at the end of 2017.

The Belgium-based brewer said on Thursday it expected revenue and core profit (EBITDA) to grow strongly again in 2018, with revenue per hectolitre rising by more than inflation and costs by less.

"We expect to continue to deliver results that are consistent with that or as strong as that," Chief Financial Officer Felipe Dutra told a conference call, indicating he expected momentum from 2017 to be maintained.

Its global brands Budweiser, Stella Artois and Corona were performing well, he said, and AB InBev was focused on persuading more consumers to opt for beer instead of other drinks.

However, he cautioned that the first quarter could be weaker because of an early Carnival, which typically marks the end of summer drinking in Brazil, and increased marketing spending ahead of the soccer World Cup in Russia in June and July.

Core profit (EBITDA), the figure most watched by markets, rose by 21 percent on a like-for-like basis in the fourth quarter to $6.19 billion, above the average forecast in a Reuters poll of $6.03 billion.

AB InBev shares were up 5.7 percent at 92.52 euros at 0845 GMT, making them the strongest in the FTSEurofirst 300 index of leading European stocks.

"Brazil is strong. It was expected to be, but it is. There will be some relief in that. U.S. was slightly better than expected... Synergies in Colombia and Australia have driven significant improvement in those regions," said Trevor Stirling, beverage analyst at Bernstein Securities.

AB InBev found savings of $381 million from its near $100 billion purchase of closest rival SABMiller, bringing the total to $2.1 billion. It is targeting $3.2 billion from a deal that has added Latin American countries and extended its reach to Africa.

BRAZIL BOUNCE

Brazil's economy returned to growth in 2017 after two years of recession, with unemployment declining and retail sales picking up. AB InBev said the recovery continued through the year, with results strongest in the fourth quarter, with core profit up 23.7 percent.

Brazil's real currency has also strengthened, boosting AB InBev's earnings in its second-biggest market in dollar terms.

Mexico was still strong, with core profit up 9.1 percent, despite disruption after the country was struck by two devastating earthquakes in September and also hit by hurricanes.

However, in the United States, the company's biggest market, AB InBev saw Budweiser and Bud Light lose market share, although price increases and a tight control of costs allowed core profit to increase.

The company replaced its North American chief at the start of the year to bolster its U.S. beer sales, which have fallen by some 15 percent since 2008 as beer has lost out to wine and spirits and consumers have shifted from mainstream lagers to beers from smaller craft brewers.

"We are not satisfied with our market share performance and are working hard to balance the share and profitability equation," AB InBev said on Thursday.

AB InBev trades on a forward enterprise value to core profit (EV/EBITDA) multiple of about 12 times, according to Thomson Reuters data.

That is above world number two Heineken, whose margins are lower, and Danish rival Carlsberg, which has been hit by multiple problems in Russia.

(Reporting by Philip Blenkinsop; Editing by Robert-Jan Bartunek and Keith Weir)