AB InBev’s profit slumps in Q2 on foreign exchange related charge

Anheuser-Busch InBev on Friday reported a drop in second quarter profit as it took a one-time extra-ordinary charge of $1.77bn related its $100bn plus acquisition of SABMiller.

The brewer of Budweiser, Stella Artois, Skol, among others hedged £45bn ($59.36bn) towards the deal in December at an average rate of $1.53 per pound. When Britain voted in favour of leaving the European Union, the currency’s value fell to $1.33 a pound on June 30, when the company’s second quarter ended.

Net profit for the quarter was $152m, down from $1.93bn a year earlier. If it weren’t for the foreign exchange charge, profit would have fallen 13% to $1.73bn.

AB InBev said that revenue fell 2.2% to $10.81bn as total beer volumes declined 1.7% amid currency volatility.

The company said it was lowering its revenue guidance for Brazil, one of its biggest markets to flat for the remainder of 2016, down from an initial forecast of mid to high single digit percentage.

“Brazil is a very tough consumer environment – inflation is high, unemployment is high, so customers’ available incomes are under pressure,” said Chief Executive Officer, Carlos Brito.

In the U.S., the brewer reported revenue growth of 2.3%, buoyed by brands such as Michelob Ultra, whose volumes climbed more than 20%. Revenue surged 9.5% in Mexico, 2% in Brazil, though volumes fell in that country. China saw a 3.9% lift in sales.

AB InBev said on Friday it continues to work to close the deal this year. Acquiring SABMiller would give it access to the African market and make it less reliant on the U.S. market where consumers taste and preference has shifted to craft beers.

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