* Mexican cost savings $325 mln of $1 bln target by end 2016
* Brazil volumes seen at lower end of flat to single-digitpct fall
* Q3 revenue $11.73 bln vs $11.86 bln forecast
* Q3 core profit $4.66 bln vs $4.54 bln forecast
By Philip Blenkinsop
BRUSSELS, Oct 31 (Reuters) - Anheuser-Busch InBev,the world's largest brewer, beat third-quarter profit forecastsas rapid cost savings in Mexico and higher prices helped offsetsagging beer sales in its giant Brazilian market.
The maker of Budweiser, Beck's and Stella Artois said it hadfound $250 million of savings just four months after taking fullcontrol of Corona brewer Grupo Modelo in Mexico, the world'sfourth-largest market in terms of profit.
That was more than analysts were expecting and helped thebrewer's shares recover after a weak start to trade up 1.8percent, the second-strongest performer in the STOXX 600European food and beverage index.
"The key thing is Mexico where the synergies were well aheadof what we were expecting. On average you'd be looking at $90million per quarter to 2016, but they've done $250 million,"said Societe Generale drinks analyst Andrew Holland.
AB InBev's rapid integration of Modelo is one of the factorsfuelling market talk that the acquisitive Belgium-based brewercould be gearing up for its next deal, a tie-up with rivalSABMiller. AB InBev has declined to comment on thespeculation.
The world's top brewers are relying on emerging markets inLatin America, Asia and Africa for growth amid subdued consumerspending in austerity-hit Europe and limited U.S. expansion.However, growth in several developing countries has disappointedthis year.
World number three Heineken cuts it profit outlooklast week due to sharply weaker sales in eastern Europe and theabsence of a recovery in large markets Brazil, Mexico andNigeria.
LOWER SALES, HIGHER PRICES
AB InBev, which sold more than one in five beers drunkworldwide last year and a third more than nearest rivalSABMiller, reported lower volumes in all regions in the thirdquarter except Asia and western Europe, the latter largelybecause of a hot dry summer which is ideal drinking weather.
The company said it was not satisfied with its performance,particularly in Brazil, where it has a 68 percent share of amarket second only to the United States in terms of profit.
Volumes there fell 5.0 percent in the third quarter and by4.7 percent over the first nine months as high food priceinflation sapped disposable income .
AB InBev said it now expected Brazilian beer industryvolumes to be at the lower end of its previous range of flat toa low single-digit percentage decline.
"In the short-term we have challenges," Chief FinancialOfficer Felipe Dutra told a conference call. Longer term, hesaid AB InBev was upbeat on Brazil, given economic growthprospects, an expanding population and the country's hosting ofthe World Cup in 2014 and the Olympics in 2016.
Volumes were also lower in Mexico due to weak economicgrowth and severe hurricanes in September.
Beer sales slipped too in the United States, where AB InBevhas almost half of the market, although lower distribution costsand new products such as Bud Light Lime Straw-Ber-Rita helpedexpand profit margins by 0.8 percentage points.
The company said overall volumes in the third quarterslipped by 1.3 percent to 119.7 million hectolitres, in linewith analysts' expectations.
However the company earned 4.2 percent more per litrebecause it sold more premium lagers, such as Budweiser in Chinaand benefited from increasing its own distribution in Brazil
Revenue rose 3.0 percent on a like-for-like basis to $11.73billion, lower than the average $11.86 billion expected in aReuters poll.
Core profit (EBITDA) increased by 10.5 percent to $4.66billion, above the $4.54 billion average forecast. It grew inevery region except central and eastern Europe.
AB InBev stuck to its forecast of $1 billion of synergygains from Modelo before the end of 2016, although it expects toachieve most of that a year earlier. Including savings foundbefore the deal closed in June, the Belgium-based company hasalready hit $325 million of its target.
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