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AB InBev forecasts higher 2021 earnings but sees hit to margins

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Philip Blenkinsop
·2 min read
FILE PHOTO: Cans of Jupiler beer are seen on the bottling line at Anheuser-Busch InBev brewery in Leuven
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By Philip Blenkinsop

BRUSSELS (Reuters) - Anheuser-Busch InBev forecast "meaningfully" better 2021 earnings on Thursday after sales in Brazil and Mexico and a large tax credit inflated profits of the world's largest brewer at the end of 2020.

The maker of Budweiser, Stella Artois and Corona lagers predicted increased drinking and higher prices as countries emerge from the COVID-19 pandemic.

However, it saw higher costs from buying dollar-denominated commodities such as barley and aluminium in the Brazilian real and other local currencies, and from a pandemic-driven shift to more consumption at home.

Carlsberg, the world's third-largest brewer, said earlier this month it was banking on most COVID-19 restrictions being lifted to buoy summer earnings. Heineken, the global number two, was more cautious as it announced 8,000 job cuts to restore margins.

AB InBev said earnings before interest, tax, depreciation and amortisation fell 2.4% to $5.07 billion in the fourth quarter.

That was above an average market forecast of $4.8 billion, but was boosted by a tax credit in Brazil. Excluding this, the profit fall was worse than the average 1.0% decline expected in a company-compiled consensus.

The Belgium-based company's shares were down 6.0% at 50.00 euros at 0810 GMT. Analysts said the lower underlying profit and cautious margin guidance were behind the decline.

Overall, margins were squeezed by a shift to the higher-priced single-use cans used for at-home drinking from cheaper reusable kegs and returnable glass bottles used in bars and restaurants, as well as higher freight rates.

In Brazil, AB InBev's second largest market, the company sold 11.9% more beer in the fourth quarter than a year earlier, with nearly a third of the population benefiting from the government's "corona voucher" payments.

AB InBev gained market share in Mexico from rival Heineken as its brands became available in OXXO, the country's largest convenience store chain. Sales rose after a two-month government-enforced shutdown of brewing operations.

In Europe, the Middle East and Africa, beer volumes fell 6% due to lockdowns, although AB InBev said it did increase market share in France, Germany and the Netherlands.

Earnings grew slightly in South Africa, although the company warned that a third national alcohol ban that lasted a month from December 29 would hit first-quarter results.

(Reporting by Philip Blenkinsop; Editing by Jacqueline Wong, Jason Neely and Jan Harvey)