USA: Anheuser-Busch is foresaw to return to slow growth and to post constructive results on improved pricing

While Anheuser-Busch won't be back to its heady days of double-digit profit growth, according to the average estimate of analysts polled by Thomson First Call, the brewer should earn 81 cents a share on revenue of $4.2 billion, 4% gains in both measures, MarketWatch reported October 19. That is not very impressive for a company that long prided itself on its superior returns but the Sultan of Suds has had a tough couple of years.

Consumer trends have been flowing against mass-produced domestic beers as American drinkers turn to more flavorful tipples like craft and micro brews and, increasingly, cocktails. That continues to be drag on the industry's domestic volume and while Anheuser-Busch has the marketing and distribution power to consistently outperform its rivals, it is doing so in a down market.

Consider: When SABMiller reported its six month results last week, it said North American domestic sales to retailers dropped 3.6% on a comparable basis, as volumes continued to suffer from market share gains by imported beers and craft beers.

"We are projecting that Anheuser-Busch will post constructive results on improved pricing, some volume growth and a more favorable commodity environment," wrote Carlos Laboy of Bear Stearns in a note to investors ahead of the report. "However, we believe that in contrast to [the first and second quarters], there is reduced opportunity for [the company] to outperform consensus expectations."

Further, "we have growing concerns about top line growth in the quarter," as management has already conceded that volumes are softer. Additionally, Laboy pointed out that according to the Beer Institute, industry shipments in the first two months of the third quarter were up only about 1%. Factoring in the percentage of the industry that is imports and crafts, a Molson Coors volume gain of 0.5% and the bad news from Miller, Laboy figures "A-B volumes likely landed somewhere in the 0.2% to 0.5% range."

Just before the quarter wrapped up, the company named August Busch IV as president and chief executive, effective December 01. He will succeed Patrick Stokes, who has held the top slot since July 2002. Stokes moves to chairman of the board, replacing August Busch III.

20 October, 2006