AB InBev halves dividend, shares tumble as major markets hit

BRUSSELS (Reuters) - Anheuser-Busch InBev ABI.BR cut its proposed dividend by half on Thursday as beer sales dropped in the world's largest brewer's largest markets, the United States and Brazil, and overall earnings fell short of forecasts, knocking its shares.

AB InBev's shares fell by 7.6 percent to 66.89 euros and were among the weakest in the FTSEurofirst index .FTEU3 after the brewer of Budweiser, Stella Artois and Corona said it will pay a total dividend of 1.80 euros per share for 2018.

This would save AB InBev, which paid around $100 billion for SABMiller in 2016, about $4 billion which the Belgium-based brewer said would be used to cut its net debt of $108.8 billion.

“In the last six months, we’ve seen a lot of (currency) volatility. This scenario triggers some sort of uncertainty and at a certain point... we thought it was the right time to adjust the dividend,” Chief Financial Officer Felipe Dutra said.

The company said dividends would increase over time, but growth would be modest in the short term given the importance of deleveraging. Dutra said this meant the next one to two years.

Third-quarter core profit (EBITDA) rose 7.5 percent on a like-for-like basis to $5.36 billion, well below the average forecast in a Reuters poll of $5.71 billion. Earnings per share, at $0.82 was also below the average expectation of $1.03.

Trevor Stirling, analyst at Bernstein Research, said that the dividend cut made sense, probably allowing AB InBev to return to a “comfort zone” of about 4 times net debt to EBITDA at the end of 2019. This stood at 4.87 at the half-year mark.

“The underlying trends were soft as well,” he said.

In the United States, AB InBev’s biggest market, beer sales declined, as did the its market share. Revenues rose, helped by price hikes and a shift to higher-priced beers, but core earnings fell due to higher commodity costs, mainly aluminum.

In Brazil, the company’s second-largest market, beer sales declined as disposable income barely rose and consumer sentiment fell. However, revenue and profit climbed due to a price hike and as marketing costs dipped after the soccer World Cup.

In South Africa, a new market for the company, earnings fell as consumers had less money to spend on beer and also due to supply constraints.

AB InBev also said it had taken an accounting hit due to hyperinflation in Argentina.

Reporting by Philip Blenkinsop; Editing by Clarence Fernandez/Sherry Jacob-Phillips/Alexander Smith