Mexico: Mexico's largest beer-maker, Grupo Modelo SA, maker of the popular Corona beer, announced on February 24 a better-than-expected 43.5% rise in quarterly net profit from cost reductions and one-time tax gains despite flat sales. Modelo, half-owned by Anheuser-Busch Cos. Inc, one of the world's largest brewers, said on Thursday its fourth-quarter net profit was 1.68 billion pesos ($150 million), according to Reuters. A previous Reuters survey of analysts had forecast on average that Modelo's net would be 1.283 billion pesos.

Modelo reported revenues of 10.994 billion pesos -- a tad higher than a year earlier -- although operationally the brewer cut costs. Earnings before interest and tax -- known as EBIT or operating profit -- rose 15.2 percent to 3.13 billion pesos.

Cost cutting drove the operating results, although a reduction in the rate of corporate income tax, which has benefited many Mexican companies, also beefed up the bottom line. "Operating expenses fell 6.7 % in the quarter, reflecting mainly the better use of infrastructure such as buildings and vehicles, and also improved efficiencies in distribution routes," Modelo said.

Shares in Modelo closed up 2.19 percent at 32.7 pesos, an all-time high. Modelo's shares are up nearly 7 percent so far this year.

Modelo said this week it planned to increase beer prices in its top domestic market in line with inflation, a move analysts viewed positively alongside the better-than-expected results. "It is a good indication of a recovery, albeit gradual, in Mexican consumption and improves the outlook for the profitability of the industry," said Credit Suisse First Boston analyst Tufic Salem.

Volumes in Mexico, where Modelo sells three-fourths of its beer production, inched up 1.6 %.

Analysts say the expansion of its local sales volumes came as it waged a price war for much of the quarter with its local rival Femsa, the No. 2 Mexican brewer. Together Modelo and Femsa have about 99 % of local beer sales.

As expected, exports slumped 9.7 %. Modelo had a flood of final-quarter sales in 2003 after distributors loaded up on inventory ahead of an export price increase that kicked in during the first quarter of 2004.

Modelo championed a restructuring in its distribution and logistics network. "It has resulted in a reduced number of vehicles in the network and a better use of vehicles that on a day-to-day basis visit sales points," Modelo said. ($1 = 11.151 pesos at end December)