(Adds details of earnings, analyst reaction, executive comments, share performance)
By Gram Slattery and Flavia Bohone
SAO PAULO, Oct 26 (Reuters) - Ambev SA, the Latin American unit of beverage company Anheuser Busch Inbev NV , reported mixed quarterly results on Thursday as sharp price hikes offset weaker volumes, leading some analysts to flag the risk of slipping market share.
Brazil-based Ambev reported a 1 percent increase in third-quarter net income from a year earlier to 3.24 billion reais ($1 billion), excluding a major tax settlement, above an average forecast of 2.64 billion reais in a Reuters survey of analysts.
Including the September settlement of a disputed corporate tax bill, profit plunged 96 percent to 136 million reais.
Earnings before interest, tax, depreciation, amortization and one-off items rose 14 percent to 4.55 billion reais, missing a consensus estimate of 4.72 billion reais.
The mixed results, including a disappointing result for soft drinks and a 5 percent drop in Brazilian beer volumes, showed the challenges facing the company after several quarters of weak demand and tougher competition.
The fight in Brazil has gotten tougher as Dutch rival Heineken NV roughly doubled its presence by acquiring Kirin Holdings' local operation this year.
JPMorgan analysts said the drop in Brazilian sales volumes and jump in prices were both larger than expected, "which tends to initially cause (market) share losses."
Beer sales volumes dropped 5 percent from a year earlier, while revenue per liter jumped 16 percent.
Swings in the price of raw materials such as aluminum, grains and sugar have led the company to increase hedging in recent quarters and continued to wreak havoc on unit costs.
Soft drink revenue rose a 10 percent from the same period a year before, but unit production costs soared 21 percent as prices for key ingredients rose.
On a conference call with investors, executives said they were disappointed with the performance of the company's soft drinks division and projected stronger profit margins in coming quarters.
Ambev shares slipped 0.5 percent in afternoon trading in Sao Paulo.
$1 = 3.23 reais Reporting by Gram Slattery and Flavia Bohone; additional reporting by Jake Spring; editing by Brad Haynes and Cynthia Osterman