- The Washington Times - Monday, February 24, 2003

RIO DE JANEIRO, Brazil, Feb. 24 (UPI) — Ambev — the world's fifth-largest brewer — said Monday that fourth-quarter profits more than doubled, although the results still fell short of analysts' expectations.

The jump in profits was mostly due to an October price increase after Brazil's currency plunged in value.

Ambev, which is Latin America's biggest brewer, said its net profit rose to $119 million in the final quarter of 2002, from $49 million from the same period a year ago.

Those numbers come despite a 35 percent drop in the local currency — the real — last year, which hit most Brazilian companies hard, especially those with costs in dollars.

Ambev wasn't immune to the decline — it must import materials such as malt — but offset the impact by increasing distributor costs by more than 10 percent, local analysts said.

"The bottom line was weaker than expected, basically due to lower than expected financial revenues," said Lika Takahashi, an analyst who covers Ambev for Banco Fator in Sao Paulo.

"This leaves a big question mark for other (Brazilian) companies, because they have dollar-denominated debt."

Ambev, which markets the upper-crust Bohemia and every-man Brahma beers in Brazil, is emerging from aggressive consolidation that began four years ago when it bought domestic challenger Antarctica Paulista.

The latest moves were announced last week, when Ambev officials said they plan to enter Peru, where they will spend $38 million on a production plant. The plant will supply Peru and neighboring countries.

Analysts approve of the push into Peru, whose economy is improving quicker than most in Latin America. Peru's gross domestic product, for example, rose 5.2 percent in 2002.

"I think they're on the right track. It has been part of their strategy to expand in Latin America," Takahashi said.

"I think they are building and consolidating their presence in the region. It is in line with what the company has been doing for the past couple of years."

But it will be a tough go in Peru, analysts say, where brewer Backus has a tight grip on the market.

Ambev already has a presence in Venezuela, Argentina, Paraguay and Uruguay, countries where it didn't fare as well as at home. Net foreign beer sales fell more than 10 percent, according to the earnings report.

In Venezuela, sales fell 28 percent, largely because of the general strike there in December. Yet sales rose 28 percent in Argentina.

Beer sales in Brazil jumped 4.6 percent, Ambev said. But its share of the domestic market fell to 67 percent from 70 percent, as cheaper brands slashed prices even more.

"Fourth-quarter results in terms of operating results were basically good. But we're not really recommending Ambev for our clients," Takahashi said. "We think it has been traded at a fair price, and we don't see much upside in the short term.

Ambev's shares fell 2.1 percent Monday on the stock exchange.


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