Budweiser brewer AB InBev hits profit forecasts, but costs on the rise 

AB InBev Profits Hit Forecasts but Brewing Costs Surge Amid Global Challenges

AB InBev's Third-Quarter Performance and Rising Cost Pressures

By Emma Rumney

Profitability Amid Global Economic Uncertainty

LONDON, Oct 29 (Reuters) - Anheuser-Busch InBev on Thursday met forecasts for third-quarter profit even as rising costs dragged on its gains, with the top brewer the latest consumer company to flag growing cost pressures in recent weeks.

Impact of Global Events on Cost Structure

Consumer goods companies have stepped up their warnings on costs as the Iran war and its impact on the global economy drag on, with brewers like AB InBev, the world's largest by global volumes, hit by higher costs for energy, diesel, aluminium and more.

Revenue Growth Offset by Commodity Costs

The maker of Stella Artois and Budweiser said its organic operating profit in the quarter was up 3.9% with revenues rising more than expected, though commodity costs offset top-line growth in some countries.

Regional and Operational Cost Challenges

Key Markets Facing Cost Increases

AB InBev flagged higher commodity, distribution and transportation costs in key markets like the United States, Europe and South Africa, where investments in sales and marketing also ate into profits.

Operating Margin and Cost of Sales

It said its operating margin contracted 34 basis points to 36.1%, while its cost of sales hit $7.21 billion -- the highest since 2023.

Industry-Wide Cost Pressures

Competitor Warnings and Analyst Expectations

Consumer goods bellwether P&G last week said higher costs would strike a bigger blow to annual profit. Tobacco maker Philip Morris International too said global conflicts were weighing on its earnings. Coca-Cola also warned of accelerating cost pressures.

Analysts also expected cost pressures to hit AB InBev in the quarter, citing the impact of unhedged diesel prices, higher prices for new hedges on aluminium and more.

Commodity Price Increases and Tariffs

Diesel prices have jumped to record highs because of the Iran war, pushing up freight and transport costs across industries. The conflict has also made energy more expensive, and put pressure on supplies of aluminium, already at elevated prices for US buyers like AB InBev due to President Donald Trump's tariffs.

Market-Specific Performance

Sales Decline in China

AB InBev said it also saw another steep 16.8% drop in sales in China in the quarter, dragging on broad growth across most of its footprint and record high volumes in 15 markets.

Challenges in the Chinese Beer Market

The company has trailed rivals in the declining Chinese beer market, where its geographic spread and greater presence in venues such as nightclubs has left it more exposed to bad weather and a shift towards drinking at home.

(Reporting by Emma Rumney; Editing by Tom Hogue and Saad Sayeed)