US, eastern Europe top up SABMiller
May 16, 2008
By Amy Wilson
London - SABMiller, the world's third- largest brewer, lifted its second-half profit a total of 24 percent by raising prices and selling more beer in eastern Europe and the US.
Net income rose to $1.07 billion (R8.16 billion) in the six months to March from $859 million a year earlier, according to annual figures reported yesterday by the London-based firm.
The reported full-year profit of $2.02 billion beat the $2 billion median estimate of eight analysts surveyed by Bloomberg.
In South Africa - which was overtaken by Latin America as the company's most profitable market - annual sales were unchanged after declining in the final quarter on the loss of a contract to brew Amstel for Heineken.
SABMiller last year bought Royal Grolsch, the Dutch brewer known for its flip-top bottles, in part to replace Amstel.
SABMiller, the brewer of Peroni Nastro Azzurro and Miller Lite, rose to a four-month high in London trading after saying higher prices should keep compensating for higher metal, barley and glass costs. Chief executive Graham Mackay said the US was one of SABMiller's most resilient markets and sales had not been hurt by the slowing economy.
However, Miller chief executive Tom Long said Americans might be switching to cheaper brands.
Long said there had been a shift away from premium lagers towards cheaper brands such as Milwaukee's Best during the final quarter of the year. He said that would not reduce the total amount of beer Miller sold.
Chief financial officer Malcolm Wyman was confident about sales growth in central Europe this year.
Matthew Webb, an analyst at JPMorgan Cazenove in London, said: "We see the outlook statement as reassuring. The key point is SABMiller's continuing confidence that it can fully offset cost increases through price and mix improvement."
The amount of beer sold in the first half of this year would be hurt by "high comparative growth rates and pressure on input costs", said a SABMiller spokesperson.
Pricing and mix benefits were again expected to compensate for these cost increases, and the economic outlook for its developing markets remained positive.
The price of brewing barley rose more than 40 percent over the year and the cost of aluminium for cans climbed by 8.5 percent.
InBev, the world's largest brewer, reported an unexpected drop in profit this month, hurt by skyrocketing commodity prices.
Mackay said the high barley prices, boosted by a poor harvest last year, might decline in the coming months.
Sales in the year climbed 15 percent to $21.4 billion.
However, the amount of beer actually sold by SABMiller slowed over the financial year, curbed by weaker consumer spending in Colombia and severe winter weather in China, two of the company's fastest-growing markets.
SABMiller invested $1.98 billion expanding production and distribution in Asia, Africa and Latin America during the year.
SABMiller rose 3.63 percent to R185.50 at 5pm in Johannesburg trading. A close at that price would be the highest since January 15.
The shares have lost 12 percent this year on concern that growth in emerging markets might be slowing.
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