AB InBev sees strong 2018 growth after Brazil rebound

By Philip Blenkinsop

LEUVEN, Belgium(Reuters) - Anheuser-Busch InBev (ABI.BR), the world's largest brewer, forecast strong growth this year after a recovery in Brazil led to higher than expected earnings at the end of 2017, its first year since buying closest rival SABMiller.

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

Chief Financial Officer Felipe Dutra told a conference call he expected momentum from 2017 to be maintained, with its Budweiser, Stella Artois and Corona brands performing well.

"We expect to continue to deliver results that are consistent with that or as strong as that," he said.

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.

The cut in U.S. corporate tax to 21 from 35 percent was also unlikely to affect AB InBev's effective tax rate in 2018 because the reform broadened the tax base and limited certain deductions.

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.

"2017 was a landmark year for our company. Not only did we deliver our best results from the last three years but we are well on the way to achieving our most successful business integration ever, following the combination with SAB," Chief Executive Carlos Brito told a news conference, adding that revenue had grown in nine of AB InBev's top 10 markets.

AB InBev shares were up 3.8 percent at 90.80 euros at 1345 GMT, making them among the strongest in the FTSEurofirst 300 index (.FTEU3) 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 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, when core profit rose 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.

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 (HEIN.AS), whose margins are lower, and Danish rival Carlsberg (CARLb.CO), which has been hit by multiple problems in Russia.

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