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AB InBev sees moderate FY'19 growth as shares tumble on Q3 profit miss

Brewer Anheuser-Busch InBev SA said Oct. 25 it expected moderate earnings growth in 2019 after it posted a third-quarter profit that fell short of analysts' expectations, sending its share price down more than 10% in early trading.

For the three months ended Sept. 30, normalized profit attributable to equity holders of the company rose to $2.41 billion from a restated profit of $1.52 billion in the prior-year period, below the S&P Global Market Intelligence mean consensus estimate for adjusted net profit of $2.50 billion.

This translated to normalized earnings per share of $1.22, up from a restated 77 cents.

Normalized EBITDA was unchanged year over year at $5.29 billion, below the mean consensus estimate of $5.55 billion. The maker of Budweiser, Corona and Stella Artois beers said its bottom-line performance was impacted by deceleration in top-line growth, a higher cost of sales resulting from significant commodity and transactional currency headwinds, and the year-over-year phasing of sales and marketing investments.

The FIFA World Cup soccer tournament in Russia in 2018 had caused sales and marketing investments to be weighted toward the first half of 2018, compared to a more balanced spending in 2019 that led to the more difficult comparable figures, AB InBev said.

"Overall, we remain confident in our strategy and the fundamental strength of our business, though we now expect moderate EBITDA growth in FY19 given the additional headwinds faced in 3Q19 which we anticipate will continue into 4Q19," the brewer said.

In early trading in Brussels on Oct. 25, the company's shares were down €8.56, or 10.3%, at €74.29.

Meanwhile, its Asian subsidiary Budweiser Brewing Co. APAC Ltd. posted a loss in its first quarterly earnings report following its listing in Hong Kong on Sept. 30.

As a result of the listing of its Asian subsidiary in September and the divestment of its Australian asset, Carlton & United Breweries, to Asahi Group Holdings Ltd., AB InBev said its net debt-to-EBITDA ratio would be below four times by the end of 2019, a year earlier than its prior guidance.

The company said revenue was $13.17 billion, up 2.7% on an organic basis. Cost of sales increased 6.9% to $5.14 billion from the restated $4.86 billion a year earlier due to significant commodity and transactional currency headwinds, according to the brewer.

Global beer volume fell by 0.5%, with a 5.9% drop in the Chinese market caused by the impact of shipment phasing. The U.S. market also saw volume shrink. The brewer estimated a decline in total U.S. market share of 85 basis points as the Budweiser brand faced competition from hard seltzer within the flavored malt beverage category and the cycling of shipment phasing ahead of a price increase in October 2018.

South Korea and Brazil were another two markets where AB InBev saw declining beer volume due to price increases. Solid beer volume growth was reported in Mexico, South Africa and Colombia.