E-Malt.com News article: 2538

Mexico's top brewer Grupo Modelo posted a higher-than-expected 6.6 % rise in quarterly net profit on April 20 as cost cutting and higher beer prices made up for weaker sales volumes, Reuters reported on April 20. Modelo, maker of the popular Corona brand and half-owned by Anheuser Busch Cos. Inc., the world's largest brewer, said its first-quarter net was 1.110 billion pesos ($100 million), up from 1.041 billion pesos a year earlier. A previous Reuters survey forecast, on average, that Modelo's net would inch up to 1.087 billion pesos in the quarter on expected revenues of 9.346 billion pesos.

Modelo's shares closed up 1.42 % at 30.63 pesos, close all-time highs and up 14 % this year. The main Mexican bourse index is up 21 % since the end of 2003.

Revenue came in lower than forecast at 9.185 billion pesos, as sales volumes fell both at home and abroad. But Modelo squeezed out more profits by cutting costs. "Sales costs dropped 1.2 % from greater production efficiencies," the Mexico City-based brewer said in a statement.

Analysts said export volumes were slightly better-than-expected, although domestic volumes were a tad weaker. Many had forecast local sales to inch higher or at least be flat, but an unusually cool and longer winter hit beer drinking, they said. "What was good from the report was the average export price rising 8 % in dollar terms," Mauricio Brocado, an analyst for the Deutsche Ixe brokerage in Mexico City, told Reuters.

That augured well for future quarters, especially combined with an expected return to higher volumes, which saw an uptick in March. "There will be better volumes (going forward) given demand got better again toward the end of the last quarter," said Brocado.

It said operating costs dropped 0.6 % so earnings before interest and taxes (EBIT) were 2.542 billion pesos, up 6.1 %. Domestic shipments of Modelo, also the brewer of Victoria, Pacifico and Montejo beers, dropped 1.7 % and exports fell 3.7 percent from the same January-March quarter last year.

Analysts had expected volumes to be weak because Modelo pushed up prices both in Mexico and in its key U.S. export market at the start of this year. About 90 % of exports go to the U.S. market, although Modelo exports to 150 nations.

Wholesalers of Modelo beer bought heavily in the fourth quarter of 2003 to avoid the price hikes, which were announced last November for the export market. ($1 = 11.124 pesos at end March)


23 April, 2004