AmBev Margins Prove Beer Beats Inflation

| About: Ambev - (ABEV)

Brazilian beer giant AmBev (ABV) is trading lower today after reporting somewhat softer than expected sales but stronger profit margins. This gives us a glimpse into how the brewers are dealing with rising commodity costs.

In fact, ABV saw cost pressure from barley and other agricultural markets — which have soared for many brewers — ease significantly, letting its overall margins widen by 3 percentage points on a year-over-year basis.

Furthermore, while traders are selling the stock today, the fact is that ABV still passed on its costs to consumers, who apparently remain eager to buy beer at any reasonable price. Sales are up 2% over the last 12 months.

The beer trade is alive and well, and now that these companies have proved that they can operate profitably in the face of high commodity prices and still maintain their sales.