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ABEV: Brazil Beer Tax Talk Takes Fizz Out of Ambev Stock

The tax hike comes ahead of the World Cup games


News of rising beer taxes in Brazil sent shares of Ambev S.A. (ABEV) tumbling 5% on Wednesday.

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Source: Flickr

Brazil’s government plans to hike beverage taxes in June. The country will host the World Cup next month and is hoping to take advantage of the increase in tourist traffic that the popular tournament will draw. The government estimates that higher beverage taxes will bring in an additional $671 million by year’s end, Bloomberg notes.

DDD: 3D Systems Buying Brazilian Robtec
DDD: 3D Systems Buying Brazilian Robtec

Adding to AmBev’s woes, on Wednesday, Bank of America (BAC) reduced its rating for ABEV stock to “Neutral,” according to Ticker Report.

Analysts say that in order to offset the beverage tax increase, Ambev could increase its prices to consumers. The Brazilian unit of Anheuser-Busch Inbev (BUD) had reported revenue growth of 8% in 2013. 

Brazil is facing the financial fallout from a downgrade of its credit rating. In March, Standard & Poor’s cut Brazil’s credit rating to BBB- due to lackluster growth and rising national debt.

ABEV shares fell more than 1% in Thursday morning trading. On Wednesday, ABEV stock closed at $7.25 per share.

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