NEW YORK (TheStreet) -- Ambev SA (ABEV), a local Brazilian unit of Anheuser-Busch Inbev SA (ABI), fell Wednesday thanks to Brazil's plan to institute higher taxes on beer prior to the World Cup this summer.
Bloomberg reports the Brazilian government will announce today a plan to increase taxes on beverages including beer, soda and bottled water beginning on June 1. Last month, Brazil suffered its first sovereign credit downgrade in 10 years when Standard & Poor's downgraded the country's credit rating one level to BBB-, its lowest investment-grade rating, and issued a stable outlook. As a result, the nation wants to strengthen efforts to increase revenue.
The planned tax increase would raise 1.5 billion reais, or $671 million, by the end of the year and would only have a minor effect on inflation, federal tax agency head Carlos Alberto Barreto told reporters in Brasilia on Tuesday.
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The World Cup begins on June 12, and the Brazilian government expects 600,000 foreign tourists at the games across 12 Brazilian cities.
The stock was down 5.37% to $7.23 at 12:24 p.m.
Separately, TheStreet Ratings team rates AMBEV SA as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMBEV SA (ABEV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."