Flat domestic sales and mounting costs have led to a slump in full-year profits at Anheuser-Busch.

The brewer yesterday (1 February) posted an 18% fall in net income to US$1.8bn during 2005, a year in which it suffered from stagnant domestic sales and embarked on a price war with rival brewer Miller Brewing.

The brewer's performance in the US weighed on group net sales, which rose 0.7%, buoyed by growth in China, Canada and Mexico. Anheuser-Busch said revenues from its domestic operations fell 2.5%, with earnings further hit from rising commodity costs in the US.

"We've had a challenging year in the domestic beer business and our 2005 sales and earnings per share were disappointing," admitted Anheuser-Busch president and CEO Patrick Stokes.

Stokes insisted, however, that the brewer was upbeat about its prospects for this year after seeing wholesaler sales-to-retailers inch up, while also gaining share in US supermarkets during the second half of 2005.

"As we move into 2006 we are encouraged with the progress of the company's initiatives to enhance beer volume and market share growth. We are pleased with this progress and anticipate sales and earnings growth in 2006," he said.

Despite seeing sales growth from its international business, Anheuser-Busch said pre-tax profits from its overseas operations were down 26%, hit by lower earnings in China and the UK.