* Q4 core profit $3.9 billion, vs expected $3.51 billion
* Sees weaker volumes in Q1, but improving from Q2
* 2011 input costs/hectolitre to rise low single-digit pct
* Says likely to exceed three-year merger savings target
* Dividend up to 0.80 euro, from 0.38 euro in 2009
* Shares up 3.1 percent
(Updates after investor conference call)
By Philip Blenkinsop
BRUSSELS, March 3 (Reuters) - U.S. and Brazilian drinkers are paying more for their beer and moving to expensive brands, according to Anheuser-Busch InBev (ABI.BR), the world's largest brewer.
The maker of Budweiser, Stella Artois and Beck's reported a better-than-expected 22 percent improvement in fourth-quarter core profit on Thursday as higher prices and cost cuts offset lower volumes in the U.S. and slowing growth in Brazil.
It saw a first-quarter drag on volumes as high U.S. unemployment and floods in Brazil kept drinkers out of bars, but improvement thereafter.
"It's (the second quarter) going to be better than the first quarter, and the second half tends to be even better," Chief Financial Officer Felipe Dutra told a news conference.
The company, which sells about one in five beers drunk worldwide, revealed that volume growth in Brazil had slowed sharply due to price hikes, while it continued to sell less beer in the United States -- its two main markets.
Beer volumes in Brazil, where AB InBev has about 70 percent of the market, grew 3.4 percent in the fourth quarter, a sharp slowdown from the 14 percent of the first nine months of 2010.
However, revenue per litre in Brazil and near neighbours rose 9.9 percent, due to price hikes, trading up to brands such as Bohemia and Stella and more direct distribution.
Brazilian inflation ended 2010 at a six-year high of 5.9 percent, principally due to a spike in food costs.
"Minimum wages set the floor, but there is a massive number of people moving up in terms of socio-economic class, and that is really what is driving beer consumption per capita in Brazil," said Dutra.
AB InBev plans to launch Budweiser in Brazil late this year.
In the United States, where AB InBev's market share is almost 50 percent, it shipped 0.9 percent less beer. Raised prices and a shift of drinkers to higher priced beers meant its revenue per litre rose 4.1 percent.
AB InBev said U.S. unemployment, particularly among young males, was continuing to affect volumes, but Dutra said the company was well placed for a recovery.
"It's more a matter of when than if it happens," he said, adding there were early signs of labour market improvement.
The U.S. jobless rate fell to 9 percent in January, its lowest level since August 2009. [ID:nN0366997]
Core profit (EBITDA) grew by a like-for-like 22 percent to $3.9 billion, compared with the $3.51 billion average forecast in a Reuters poll of 17 brokers. [ID:nLDE71O1IA]
AB InBev more than doubled its dividend to 0.80 euro.
Its shares were up 3.1 percent at 0845 GMT, making them one of the strongest performers in the FTSEurofirst 300 index .FTEU3 of leading European stocks.
Analysts said weak first-quarter volumes, partly due to rains capping consumption in Brazil, were already factored in.
"There was some uncertainly already in the share price... Volumes may not be so good, but prices have risen by much more. This is an enormous positive," said ING analyst Gerard Rijk.
KBC raised its recommendation on AB InBev shares to accumulate from hold.
Graph on top global brewers: r.reuters.com/puq97r
AB InBev extracted a further $170 million in savings from InBev's 2008 takeover of Anheuser-Busch in the fourth quarter. The company said it was likely to exceed its three-year savings target of $2.25 billion.
Investors were keen for comment on input costs, given rocketing raw materials prices. The futures price for malting barley EOBc1 has risen 35 percent since the launch of the contract in May last year.
AB InBev said its cost of sales per hectolitre would rise by a low single-digit percentage this year. That figure fell by 1.2 percent in 2010.
It added that revenue per hectolitre should grow ahead of inflation, although it would also up its marketing spend.
AB InBev is the last of the big four brewers to provide information on the final months of 2010.
World number two, SABMiller SAB.L, with a strong presence in fast-growing African and Latin American markets, said lager volumes rose 3 percent in the fourth quarter. [ID:nLDE70C1EC]
World number three Heineken (HEIN.AS), the market leader in Europe, suffered volume decline, but raised profit by savings in Europe and from its large Mexican acquisition. [ID:nLDE71E2BQ]
Fourth-placed Carlsberg (CARLb.CO) warned investors of modest growth and squeezed margins in Russia. (Editing by Hans Peters and Will Waterman)