SABMiller Profit Tops Estimates on Africa, Latin America

SABMiller’s Profit Tops Estimates on Africa, Latin America
SABMiller said the acquisition of Foster’s “contributed significantly” to the increase in earnings. Photographer: Simon Dawson/Bloomberg

SABMiller Plc, the world’s second-biggest brewer, said first-half earnings rose 17 percent as gains in Latin America and Africa offset European declines, and the acquisition of Foster’s Group Ltd. boosted profitability.

The shares rose the most in more than a year after the maker of Grolsch and Peroni said earnings before interest, taxation and amortization climbed to $3.17 billion, excluding some items. That compared with the $3.1 billion median estimate of 10 analysts surveyed by Bloomberg.

The 0.3 percentage point increase in organic profit margins was unexpected, according to David Belaunde, an analyst at Morgan Stanley. Profitability was boosted by cost savings and acquisitions, offsetting higher raw-materials prices and adverse foreign-exchange swings stemming from weakness of the South African rand and central European currencies, the company said.

The margin growth “should start to reassure investors,” Belaunde wrote in a note to clients. He has an equal-weight recommendation on the stock, which is up 24 percent this year.

SABMiller rose 6.4 percent in London, the steepest advance since Oct. 6, 2011, to 2,801 pence. That values the maker of Castle lager at about 44.7 billion pounds ($71 billion.)

Earnings in Latin America, the company’s largest region, rose 15 percent in the half, helped by selective price increases and savings from more efficient purchasing, SABMiller said. Volume growth in the region slowed in the second quarter amid weaker consumer sentiment, the brewer had said last month.

Foster’s Integration

SABMiller said the acquisition of Foster’s “contributed significantly” to the increase in earnings. The Australian brewer was acquired last year for about A$10.5 billion ($10.9 billion), giving SABMiller about half the country’s beer market.

Earnings in the Asia-Pacific region more than tripled to $506 million, gaining 10 percent on an organic basis, SABMiller said. In Africa, earnings increased by 8 percent, though growth was 19 percent excluding acquisitions and currency shifts.

Ebita in Europe fell 10 percent, or 5 percent on an organic basis, as higher raw-material costs and sales of cheaper drinks weighed on profitability. Volume in the region rose 9 percent.

VB Recipe

Margins were boosted by sales of pricier products and the integration of Foster’s, SABMiller said. Including acquisitions, the Ebita margin widened by 1 percentage point. The company said the Foster’s integration was progressing well, and that revenue per hectoliter rose 3.5 percent as it raised prices and improved the mix of beers sold. It shifted the recipe of its key Victoria Bitter brand back to a formula abandoned in 2007, which has been “well-received.”

Group revenue rose 11 percent to $17.5 billion.

The “broad pattern will continue” globally for the second half of the year, the company said today on a call.

It warned that it had “recently seen moderation of economic growth in some countries, but the potential of the principal emerging markets in which we operate remains strong.” Input cost pressures will continue at a level “similar to the first half.”

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