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InBev, European Brewers May Say Profit Rose on Brazil, Russia

Feb. 20 (Bloomberg) -- InBev NV, Scottish Newcastle Plc, Carlsberg A/S and Heineken NV may report higher earnings after Europe's biggest beermakers expanded in Russia and Brazil to counter declining sales in their home markets.

InBev, Europe's largest beer company, may say Feb. 24 that earnings last year increased 39 percent to 997 million euros ($1.2 billion) from 719 million euros in 2004, according to the median estimate of five analysts surveyed by Bloomberg. Scottish & Newcastle's profit rose 40 percent, a separate survey showed.

Beer sales in Western Europe are shrinking, so brewers are making acquisitions in Eastern Europe and Latin America to compete with Anheuser-Bush Cos., the biggest company in the industry. InBev, the brewer of Stella Artois based in the Belgian town of Leuven, bought Brazil's AmBev for $11.2 billion in 2004. Scottish & Newcastle and Carlsberg jointly own Baltic Beverages Holding AB.

``Exposure to emerging markets and cost cutting'' are key for such companies, said Patrick Casselman, who oversees the equivalent of $599 million at KBC Asset Management in Brussels, including InBev and Heineken shares.

Beer sales barely budged in North America and fell 0.5 percent in Europe in the two years through 2004, according to JPMorgan Chase & Co. analysts Simon Hales and Nigel Davies. Sales rose 3.5 percent in Latin America, 7.2 percent in Central and Eastern Europe and gained 5 percent in the Asia-Pacific region, according to the JPMorgan note on Feb. 9.

Shares Gain

The Bloomberg Europe Beverages Index jumped 25 percent last year, outpacing the Bloomberg European 500 Index's 21 percent increase. Carlsberg's shares climbed 22 percent, while InBev advanced 29 percent and Scottish & Newcastle added 12 percent. Heineken stock posted a 9.2 percent gain.

Gwendoline Ornigg, a spokeswoman for InBev, and Carlsberg spokesman Jens Peter Skaarup declined to comment on their companies' earnings. Spokesmen for Scottish & Newcastle and Heineken also declined to comment.

Edinburgh-based Scottish & Newcastle, the maker of Kronenbourg lager and John Smith's bitter, may say Feb. 21 that 2005 net income rose to 285 million pounds ($494 million) from 203 million pounds a year earlier, according to five analysts surveyed by Bloomberg News. Sales probably rose 1.7 percent, the survey showed.

Earnings at Valby, Denmark-based Carlsberg, maker of Tuborg and Baltika beers, probably rose to 1.14 billion kroner ($180 million), the median estimate from nine analysts surveyed by Copenhagen-based RB Boersen shows. Sales gained 5.5 percent, a survey of 11 analysts by the same company shows.

Scottish & Newcastle, Heineken and Carlsberg will report full- year results under International Financial Reporting Standards for the first time.

Russian Growth

Scottish & Newcastle, led by Chief Executive Officer Anthony Froggatt, 57, and Carlsberg jointly own Bromma, Sweden-based Baltic Beverages Holding, a venture that on Feb. 14 reported a 25 percent jump in earnings for last year. Baltic Beverages operates in six countries in Eastern Europe including Russia, where the company is market leader, with a share of 36 percent. Its brands include Yarpivo and Saku. The company runs about 18 breweries, 10 of them in Russia.

Russia's beer market has doubled since 1999 and will expand 33 percent by 2010, according to estimates by UBS AG. The Russian economy will grow 6 percent this year, the government said on Feb. 9.

Russia growth has also lured Amsterdam-based Heineken, which makes Amstel lager and Murphy's Irish Stout in addition to the namesake Heineken brand. Heineken's 2005 net income probably climbed 12 percent to 721 million euros from 642 million euros a year earlier, according to the median estimate of seven analysts surveyed by Bloomberg News.

About 62 percent of analysts that cover InBev have a ``buy'' rating on the stock, compared with 47 percent for Carlsberg, 33 percent for Scottish & Newcastle and 32 percent for Heineken, according to data compiled by Bloomberg.

Carlsberg, under Chief Executive Nils Smedegaard Andersen, 47, has the highest proportion of ``sell'' ratings at 42 percent, compared with 33 percent for Scottish & Newcastle, 27 percent for Heineken and 15 percent for InBev, the data shows.

Cost Savings

``My best pick would be Heineken,'' said Edouard Dubuis, who helps oversee about $31 billion at Clariden Bank in Zurich, including Heineken, Carlsberg and InBev shares. ``It has the best balance between emerging markets, which have potential for growth, and mature markets, which offer more scope for cutting costs.''

Heineken generated about 63 percent of sales from Western Europe, 15 percent in the Americas and 19 percent in Central and Eastern Europe in 2004. Chief Executive Jean-Francois van Boxmeer, 44, is eliminating 240 jobs in France and closing breweries to achieve savings of 190 million euros before taxation by 2008.

Scottish & Newcastle is planning to save 60 million pounds at its British unit by 2007 by closing breweries. At the same time, the U.K. company is spending more on advertising and promotions.

InBev, the world's largest brewer by volume, announced job cuts in Belgium and France last year, and said it will shut its Hoegaarden brewery to reduce costs. InBev named Carlos Brito, a 45 year-old Brazilian national, chief executive on Dec. 27.

Clariden's Dubuis has been holding InBev shares for the last three years and has been `happy'' with his investment. ``The only question-mark is valuation,'' he said.

InBev's stock trades at 21.6 times estimated 2005 earnings, compared with 18.3 times earnings for Heineken, 16.2 times for Scottish & Newcastle and 21.3 times for Carlsberg, according to data compiled by Bloomberg.

http://www.bloomberg.com/apps/news?pid=10000085&sid=aWAyJLFVtFTw&refer=europe#
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