USA: Anheuser-Busch cut at UBS on rising cost of business

On April 22 UBS Securities cut its rating on Anheuser-Busch Cos. Inc. to reduce from neutral. UBS attributed its move to the company's rising costs of business and share losses to rival Miller Brewing and to wine and spirits. UBS expects Anheuser-Busch's earnings per share to fall in 2004 with an average growth of 6 % to 8 % over the next three years.

In a research report, UBS analysts Caroline Levy and Nik Modi said weak volumes in the first quarter have led A-B to speed discounting despite its rising costs. In addition, the analysts said the launch of Bud Select is "high risk and could be up to 80 percent cannibalistic."

A-B's shares increased more than 6 % on April 21 after Warren Buffet's Berkshire Hathaway took a "significant" stake. "While we appreciate Mr. Buffet's track record, our Reduce-1 rating (from Neutral-1) reflects our 12-month view vs. Mr. Buffet's considerably longer time horizon," the analysts said in the report.

A-B is expected to see increased competition from Miller's Miller Lite brand as well as from the combined Molson-Coors Co., the report said.

St. Louis-based Anheuser-Busch Cos. Inc., the largest domestic brewer, manufactures and recycles aluminum cans and operates theme parks.

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