A-B InBevs Brazil unit is expected to see more short-term softness

A-B InBev's Brazil unit is expected to see more short-term softness

Anheuser-Busch InBev faces “hard work” in Brazil and its second-quarter figures for the region are unlikely to be “pretty”, according to an analyst. 

The brewer’s volumes in the region are expected to be down mid-single digits in Q2, as Brazil’s core market recovers from a difficult first quarter, Grupo Santander analyst Anthony Bucalo said in a note today (5 July). “The Brazilian macro environment is wobbling with social unrest and fears of stagflation (stagnation and inflation) starting to seep into the market,” the note said. 

“The BRL has depreciated against the US dollar by 10% so far this year to reflect that insecurity.”

But Bucalo added: “We have confidence in AmBev’s disciplined execution and affordability strategy to regain volume momentum.”

Earlier this week, another analyst also raised fears over how Brazil could drag down A-B InBev's performance. 

However, Grupo Santander suggested to investors it could be a good time to buy stock in the Budweiser brewer.  

"With the general pressure on the sector, we think shares in the medium term will be caught in the brackish water between current weakness and a rebound driven by the Modelo restructuring and a World Cup-driven recovery in Brazil, both of which are unlikely to be evident until 4Q13E," the note said. "We could take this period of softness as an opportunity to accumulate shares whilst the market is sour."