SABMiller Forecasts Improved Margin After Profit Rises 14%
Stock Chart for SABMiller PLC (SAB)
Earnings before interest, taxes and amortization in the year to March 31 rose to $6.42 billion, the London-based company said today. The median estimate of 13 analysts surveyed by Bloomberg News was $6.46 billion. On an organic basis, which excludes the effects of acquisitions and currency shifts, profit rose 9 percent, matching analysts’ estimates.
The maker of Grolsch and Peroni expects Ebita margin, a measure of profitability, to increase 20 to 50 basis points this year, aided by new products and cost-reduction measures such as more efficient purchasing, Chief Financial Officer Jamie Wilson said. The company also plans to invest about $1.7 billion this year, focusing on increasing capacity in Africa and Latin America.
“Trading conditions are expected to be broadly unchanged, affording opportunities to grow our categories further, particularly in developing markets,” the company said, adding that it will raise prices selectively as unit input costs climb in low to mid-single digits in constant-currency terms.
Brewers are tapping growth in developing countries to offset tougher conditions in Europe and the U.S. SABMiller, originally founded in South Africa, has the largest exposure to emerging markets of its peers. Alan Clark, the company’s chief executive officer, said today he was confident growth in those regions will continue.
SABMiller shares fell 1.9 percent to 3,469 pence at 9:35 a.m. in London as the benchmark FTSE 100 Index declined 1.9 percent. The company has a price to earnings ratio of 25, higher than European-based competitors Anheuser-Busch InBev NV, Carlsberg A/S (CARLB) and Heineken NV. (HEIA)
“Longer-term, SABMiller has major attractions thanks to its high emerging market exposure, strong market positions and strong management, but we think these are now reflected in the share price,” Eddy Hargreaves, an analyst at Canaccord in London, wrote today.
Annual group revenue increased to $35.5 billion from $31.4 billion. On an organic basis, sales rose 7 percent, exceeding volume growth, as the company made “selective” price increases and broadened its price range.
Ebita rose on an organic basis across all regions. It gained 11 percent in Latin America even as softening economic growth in Colombia weighed on volume. The company is seeking to improve profitability across the region as well as to make beer more affordable for lower-income consumers.
Organic Ebita rose 1 percent in Europe as sales of more “brand and pack innovations” helped offset price cuts and increased trading down by consumers in Poland, where it sells the Tyskie brand, SABMiller said. Competitor Heineken reined back its forecast for annual growth in April after reporting tough conditions in Europe as consumers cut spending.
Heineken also reported lower volume growth in emerging economies including central and eastern Europe, the Asia-Pacific market and the Americas. AB InBev (ABI), the world’s biggest brewer, missed first-quarter profit estimates and cut its predictions for growth in Brazil, one of its biggest markets.
SABMiller CEO Clark said today that growth across Europe was boosted by innovation, though difficult conditions would remain there for some time.
“The fundamentals of economic growth remain strong” in Latin America, he said, and he sees “good ongoing strong growth in Africa.”
Organic Ebita grew 20 percent in Africa and 7 percent in Asia Pacific.
SABMiller accelerated the appointment of Alan Clark as chief executive officer in April after his predecessor Graham Mackay was treated for a brain tumor. Mackay, who was due to take up the role of chairman, is on medical leave as he undergoes further treatment, and a decision will be made on his role at the company once his medical condition becomes clearer, Clark said today.
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