Budweiser brewer AB InBev hits profit forecasts, but costs on the rise

Anheuser-Busch InBev, the world's largest brewery by global volumes, matched its profit forecasts for the third quarter, but rising costs hampered its progress. The company's top brewer raised concerns about growing cost pressures, joining a trend seen in other consumer goods firms in recent weeks. The turmoil from the Iran war and its effects on the global economy have contributed to the cost increases.

AB InBev's organic operating profit grew by 3.9% in the quarter, with revenue surpassing expectations, yet commodity costs offset growth in certain regions. The increase in costs was primarily due to higher expenses for energy, diesel, aluminium, and more. The company attributed the cost uptick to its investments in sales and marketing, as well as higher costs in key markets such as the United States, Europe, and South Africa.

AB InBev's operating margin declined by 34 basis points to 36.1%, while its cost of sales reached a record high of $7.21 billion since 2023. P&G and Philip Morris International have also warned of significant profit impacts due to rising costs. Analysts expect further cost pressures on AB InBev, citing the effect of unhedged diesel prices, higher prices for new hedges on aluminium, and the conflict's impact on energy supplies and aluminium prices.

The company experienced a steep 16.8% drop in sales in China, dampening growth across most of its operations and record-high volumes in 15 markets. AB InBev's heavy presence in China, especially its sales through nightclubs, has exposed it to adverse weather conditions and a shift towards home consumption.