Shares of AB InBev, the world’s largest brewer, experienced a significant decline of 8.71% at 9:49 a.m. London time (4:49 a.m. ET) on Wednesday. The company announced a 69% profit leap in the first quarter this year. This remarkable performance stands in stark contradiction with the alarming decline of their operations today.
For the three months ended March 31, AB InBev reported revenues rising 3% organically to $15 billion. Sales exploded all across the booming U.S. market. This counter-recovery came on the heels of a drop that had occurred earlier in the year. Despite its impressive performance, a 6.5% drop in volumes for the final quarter has put a damper on things. This decrease is due to difficult year-on-year comparisons and adverse weather conditions in Brazil.
The worst numbers came from the China region, where AB InBev’s volumes were down 7.4%. Yet the company acknowledged that it is lagging behind peers on the industry’s most important market. This issue leads to huge red flags over its competitive fate in the world’s second-largest beer market. This outsized underperformance in China has been the biggest driver weighing on the stock’s decline.
Analysts point out that AB InBev’s first quarter profits are inflated. They caution that if volumes in crucial Latin American and Asian markets such as Brazil and China start to decline, it may begin to rattle investor confidence. The firm is highly reliant on these newer markets for continued growth. This dependence engenders major concerns over its ability to maintain momentum in a highly competitive arena.