BRUSSELS (AP) -- Brewer Anheuser Busch InBev said Thursday it will raise $1.8 billion by selling South Korea's Oriental Brewery, the country's second largest, to private equity group Kohlberg Kravis Roberts & Co. LP. to cut down on its huge debt burden.
The owner of Budweiser, the world's best-selling beer, is trying to sell off units to help pay off the loans that funded InBev's $52 billion takeover of Anheuser-Busch that formed the company.
AB InBev also said it posted a profit of $716 million for the first three months of the year, which it said it could not compare to the $373 million InBev reported alone last year before taking over Anheuser-Busch.
Posting a 7 percent drop in sales to $8.19 billion in the first quarter, the company said the business environment was "challenging" and it would keep up a cutback program.
Sales were $8.85 billion for the two companies a year ago.
Beer-making costs are rising, it warned, describing the overall environment as "challenging" with sales are flat or declining in wealthy nations badly hit by a recession that has curbed customer spending.
But beer is "a very resilient business, even in downturns," AB InBev chief financial officer Felipe Dutra told reporters. The volume of beer and soft drinks the company sold rose 0.9 percent in the first quarter.
"During downturns what we usually see is a combination of people trading down from wine and spirits into beer, people shifting channels from on-premise into off-premise, staying more at home with friends and family," he said.
The company said it would keep focused on high-margin key brands -- such as Budweiser and Stella Artois -- even though the emphasis on premium over lower-price beer has cost it sales in Russia and eastern Europe.
"We see weaker volumes overall in western Europe ... but we were able to gain market share across all three relevant markets: UK, Germany and Belgium," Dutra said. Growth came from premium beers -- including Stella which managed to turnaround a British sales slump.
U.S. volumes climbed slightly, by 0.1 percent, with imports of the company's Belgian lager Stella Artois up nearly 37 percent from a year ago, when distribution stalled. But Canada did not match this, with beer sales down 2.1 percent.
Volumes were also down in China overall despite better sales of Budweiser and local brand Harbin.
But Latin America saw volumes grow 7.6 percent, largely thanks to Brazil where falling food prices, carnival season and good weather saw volumes rise even though higher prices ate into market share.
The company kept its targets to raise "at least" $7 billion from selloffs this year, to generate $1 billion in savings from merging InBev and Anheuser-Busch and shave $1 billion off total costs and another $500 million from U.S. operations.
The South Korean sale -- the biggest private equity bid ever in the country -- gives KKR the exclusive right to distribute key brands in South Korea, including Budweiser, Bud-Ice and Hoegaarden.
AB InBev keeps the right to buy the brewery back five years after the deal closes at a pre-agreed price that it did not disclose.
"This is an asset, OB, that InBev very much would love to own again in the future," Joseph Y. Bae, head of KKR's Asian operations, told reporters in Seoul.
"The only reason they are selling this business today is because they have a significant amount of debt at the parent company. This is one of the best performing assets within the InBev portfolio around the world," he said.
"If they do buy it back from us in five years at their choice that would generate a very attractive return for us as well," he said.
AB InBev said the deal should close by the third quarter and KKR had already obtained financing. It expects to post a one-off gain of $500 million from the sale.
Oriental Brewery had 41.6 percent of the South Korean beer market in 2008, trailing Hite Brewery Co. with 58.4 percent.
Associated Press writer Kelly Olsen in Seoul, South Korea, contributed to this story.