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There were some mixed messages coming from the analysts zone after Anheuser-Busch InBev released its - equally mixed - results yesterday (31 October).

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Profits were up but volumes were flat as price increases, particularly in Brazil, offset weak consumption. It was “a mixed bag”, analysts Bernstein Research said, warming to the day's theme.

“On the positive, AB InBev reported healthy organic top and bottom-line growth in the quarter, though boosted by a strong price windfall in Brazil and 2012 EPS will benefit from a lower guided tax rate,” the analyst said.

On the down side, the tax benefit is a one-off and margins will come under pressure from currency fluctuations, Bernstein said.

Margins were a cause for concern with analyst Nomura, which highlighted an overall contraction in the past two quarters. “Margin expansion in beer is becoming tougher,” Nomura said.

The analyst put this pressure down to new innovations such as Bud Light Premium and Lima-A-Rita, something that A-B InBev CEO Carlos Brito agreed with in his conference call with investors.

Nomura said: “New products tend to complicate the simple business model both from increased cost of sales, higher distribution and higher sales and marketing costs.

“But what is the alternative in a market where consumers are now seeking 'something new'? Standing still really means going backward in US beer now, but going forward costs money.”

The Wall Street Journal hit a pessimistic note on the US, saying: “Economists are concerned that Hurricane Sandy and the coming presidential election could hit consumer spending and slow the recovery.” However, it also applauded a sales volumes reverse in the US, which accounts for 60% of A-B Inbev's beer profit and about a third of demand. In Q2, the brewer saw sales decline by 1.8% in the US while this quarter they increased by 1.3%.

An analyst in the Financial Times was also happier about A-B InBev's outlook.

“After the minor wobble in Q2, we see Q3 results as highly reassuring,” said Eddy Hargreave from Canaccord Genuity. “We see more positives than negatives in the results, and continue to see A-B InBev as significantly undervalued given the strong cashflow, M&A options, and top quality management team.”


Sectors: Beer & cider

Companies: Anheuser-Busch InBev

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