Anheuser-Busch Profit Up on Price Rises

By Mark Weinraub

NEW YORK (Reuters) - Anheuser-Busch Cos. Inc., the world's largest brewer, said on Wednesday its quarterly earnings rose 9 percent as it raised prices and sold more premium products such as Michelob Ultra low-carbohydrate beer.

The company said fourth-quarter profit rose to $294 million, or 36 cents a share, from $269.2 million, or 32 cents a share, last year. Results met Wall Street estimates.

The company said gross sales rose to $3.72 billion from $3.59 billion. Net sales, including the effect of excise taxes, rose to $3.22 billion from $3.10 billion.

Total volume of Anheuser-Busch products sold rose by 2 percent in the fourth quarter. Domestically, volume rose only 0.5 percent, helped by health-conscious consumers who snapped up Michelob Ultra and Bud Light.

Customer acceptance of price hikes and premium products will be key to Anheuser-Busch's future profit because of overall sluggish growth in the beer industry. Chief Financial Officer W. Randolph Baker said the company is assuming total industry growth of only 1 percent.

Although Michelob Ultra has sold well since its debut about a year ago, it is still too early to predict if it has staying power, said Mark Swartzberg, analyst with Legg Mason.

But its introduction shows that beer drinkers are still looking for new products.

"I do think you can infer that consumers are going to trade up," said Swartzberg, who has a rating of "hold" on Anheuser-Busch shares. "They are going to look for premium products. This is a trend that directionally is a good thing for the beer industry."

Anheuser-Busch said it raised prices in markets that contributed 40 percent of the company's U.S. volume in the fourth quarter. Domestic revenue per barrel rose 2.7 percent in the quarter.

The company said it began to implement price hikes this week in regions that make up 25 percent of its U.S. volume.

"The company's proven ability to leverage its substantial competitive strengths has led to these consistently strong results," Chief Executive Patrick Stokes said in a news release. "The beer pricing environment remains favorable."

Stokes said he was confident the company could maintain double-digit percentage growth in earnings per share over the long term. He reiterated the company's forecast of 12 percent earnings growth in 2004.

The company forecast domestic volume increases of 1.5 percent to 2 percent in 2004 but said the first-quarter growth would be below the range for the year. The company said revenue per barrel growth would be in a range of 2 percent to 2.5 percent for the year but higher than that in the first quarter.

The profit report came out on the same day that a California couple whose daughter was killed by an underage drunk driver announced that they sued Anheuser-Busch and SABMiller Plc unit Miller Brewing. The suit claims the brewers' advertising is targeted at minors.

Anheuser-Busch said the lawsuit has no merit and defended its advertising practices.

Earnings met the mean Wall Street estimate of 36 cents, according to Reuters Research, a unit of Reuters Group Plc. Shares of Anheuser-Busch rose 23 cents to close at $51.88 on the New York Stock Exchange. The stock, which had hovered around that level for much of the trading day, rose as high as $52.43 shortly after the earnings were released.