October 25, 2018 / 12:50 PM / 25 days ago

UPDATE 1-Argentine inflation, Brazil competition squeeze beverage giant Ambev

(Rewrites throughout to give details on regions, operational metrics)

By Gram Slattery

SAO PAULO, Oct 25 (Reuters) - Ambev SA, the Latin American unit of brewer Anheuser Busch InBev, posted mixed third-quarter results on Thursday, with margins hurt by higher inflation in Argentina and rising input costs and slipping market share in key market Brazil.

Latin America’s largest brewer reported a net profit of 2.89 billion reais ($774 million), a drop of some 10.2 percent from last year when adjusted for some one-off accounting factors.

While that was above the Reuters consensus forecast of 2.68 billion reais, earnings before interest, taxes, depreciation, and amortization (EBITDA) missed forecasts, coming in at 4.45 billion reais, well below a Reuters projection of 5.11 billion.

In the quarter, the firm said EBITDA took a 574-million-real hit, as the firm adopted hyperinflationary accounting methods in Argentina, in accordance with international standards.

Argentina, Latin America’s third-largest economy, has suffered from repeated crises of confidence in 2018. After the worst drought in 60 years withered grain exports, a run on the peso halved the currency’s value against the dollar, prompting the country to enter a $57 billion standby financing agreement with the International Monetary Fund.

Across the board, Ambev said, unit production costs climbed 4.7 percent on increased commodity costs as well as Argentine inflation.

In key market Brazil, EBITDA ticked up a modest 0.3 percent, but beer volume fell 3.1 percent, underperforming the market as a whole, which reported a 2.5 percent decrease in volume.

That may indicate that Dutch brewer Heineken NV - which is betting big on the Brazilian beer market - is beginning to take a chunk out of its rival’s business here. Ambev’s non-alcoholic business in Brazil, a segment in which it does not compete against Heineken, reported sharp gains, with EBITDA jumping some 136 percent in the quarter.

To maintain its dominant position in the beer market, Ambev said it was continuing to invest in its more upscale brands, such as Budweiser, Stella Artois, and Corona, as well as Skol Hops, a ‘core plus’ brand that it recently rolled out.

The firm said those brands reported a solid quarter volume-wise, with sales of Corona surging 75 percent year-on-year and sales of Stella Artois jumping 55 percent.

The company posted EBITDA growth of 5.8 percent in the Caribbean and Central American region, partly due to branding initiatives. EBITDA in Canada fell some 7 percent on higher input costs, particularly aluminum.

($1 = 3.73 reais)

Reporting by Gram Slattery; Editing by Bernadette Baum

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