InBev: Costs Up More Than Expected

Belgian brewer, which is taking over Anheuser-Busch, said it will accelerate cost-cutting efforts, using its global muscle to keep supply costs down.

BRUSSELS, Belgium (AP) -- Brewer InBev SA said Friday its costs will grow more than expected this year as third-quarter prices for beer ingredients barley and malt climb and wages increase in line with high inflation.

The Belgian-based company, which is taking over Anheuser-Busch Cos. to become the world's largest brewer, said it will accelerate cost-cutting efforts, using its global muscle to keep supply costs down, and hedge on commodities price exposure.

It expects the situation to ease in the fourth quarter as prices for basic ingredients start to calm.

InBev also forecast that total volumes of the beer it sells will increase in the "low single digit percentage range."

"We expect that North America, Latin America North, Latin America South and Asia Pacific will report growth in total volumes, while in Western Europe and Central and Eastern Europe small declines in volumes are expected to occur," the company said in a trading update.

Sales are falling in Russia and Ukraine where the company is shifting away from low-end beers toward premium beer that costs more to package. Higher margin and premium brands have "not yet fully offset the decline in the more affordable brands," it said.

In Britain, InBev claimed that efforts to tackle a negative brand image for its high-alcohol Stella Artois lager are starting to pay off with "some signs of stabilization" and the launch of a lower-alcohol version. Stella's alcohol content has been linked to a British on binge-drinking.

The company also said it expects to plans to launch a rights issue from Oct. 16-30 that would to raise $9.8 billion to help finance the Anheuser acquisition.

Separately Friday, Anheuser-Busch Cos. said its U.S. beer volume rose in the third quarter, as the Budweiser and Michelob brewer rolled out new products. Anheuser-Busch credited the national launch of Bud Light Lime with helping boost domestic beer volume growth. U.S. beer shipments to wholesalers increased 2.3 percent, and sales to retailers rose 3.6 percent.

The U.S. brewer also said pricing in its domestic beer market is "favorable," forecasting revenue per barrel will rise nearly 4 percent in the third quarter on price increases implemented in late September.

The St. Louis, Mo.-based brewer said cost-cutting measures are helping offset higher commodity costs.

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