SABMiller Says Annual Profit Rises, Boosted by Africa
SABMiller Plc (SAB), the world’s second- biggest brewer by volume, said it expects profit margins to show little change this year as savings programs and price increases offset rising commodity prices.
The brewer of Grolsch and Peroni, which reported a 12 percent increase in annual earnings before interest, taxes and amortization today, expects its Ebitda margin to remain “flattish” in the fiscal year ending March 2013, Chief Executive Officer Graham Mackay said on a conference call.
Brewers including SABMiller face rising prices for barley and sugar as well as lackluster demand in the U.S. and Europe, where economic turmoil is leading drinkers to trade down to cheaper beers. The London-based company said it’s counting on growth in Latin America and Africa, which buoyed earnings in the past fiscal year, to continue to drive growth.
The results showed that “the core regions of Latin America and South Africa are doing quite well,” said Gerard Rijk, an analyst at ING Groep NV in Amsterdam. “The focus will be, in my view, on Foster’s” and whether the company can continue to drive cost improvements.
SABMiller, which started selling beer to gold prospectors in South Africa in 1895, bought Australia’s Foster’s Group Ltd. for about A$10.5 billion ($10.3 billion) last year to further its expansion outside Europe and the U.S. The integration is proceeding well, it said today.
Prepared for Greek Exit
The stock showed little change, trading at 2,399.5 pence as of 11:04 a.m. in London. The shares have gained about 6 percent this year.
SABMiller declined to comment on the prospects for the euro zone or the possibility of a Greek exit from the group, saying it’s less exposed than other consumer-goods companies and is “watching the situation carefully.” CFO Wilson said today on a conference call that the company was “prepared” in case of an exit, and is taking steps including ensuring it minimizes exposure to the euro where possible.
Ebita rose to $5.63 billion in the year ended March 31, the brewer said in a statement. The median estimate of nine analysts surveyed by Bloomberg News was for profit on that basis of $5.7 billion. Ebita expanded in all regions except Europe, where consumers selecting cheaper beers in Romania and Poland hurt sales. Organic Ebita rose 14 percent in Latin America and 13 percent in Africa.
Developing countries will probably continue to expand in the current year, the company said, while markets including Europe and the U.S. will post no more than “modest improvements” in consumer spending.
The brewer selectively increased prices in Latin America last year, its biggest region, while also selling more beer there and in Africa. Annual beer volume rose 3 percent in the period, excluding the effect of acquisitions and currency fluctuations. Group revenue rose 11 percent to $31.4 billion.
The company still has “reasonable pricing power” in many markets, Chief Financial Officer Jamie Wilson said today in an interview on Bloomberg Television with Mark Barton.
Mackay said he hopes input costs may fall in the second half, but “that depends on the agricultural crops still in the ground,” specifically the European and North American barley harvests.
Rival Heineken NV forecast in February that input costs per hectoliter would rise about 6 percent this year as malting barley, a key ingredient, rose “substantially.”
SABMiller reported a 10 basis-point improvement in Ebita margin to 17.9 percent for the past fiscal year. It said it expects the cost of goods to make its beers to grow by “mid- single digits” this year.
SABMiller said its so-called business capability program, which aims to save money by centralizing purchases of raw materials and services, “exceeded expectations.” It increased its forecasts for savings from the program for this fiscal year and next, which could be “positive for the margin,” analysts including Martin Deboo and Gideon Adler at Investec Plc in London wrote in a note to clients.
Sales and Ebita on a pro-forma basis slid at Foster’s due to “subdued” consumer sentiment and increased commercial investment. The Australian beer market is showing a “broad continuation of previous trends, with perhaps a slightly firmer tone,” Mackay said today on a conference call.
SABMiller increased its dividend by 12 percent to 91 cents. Net income rose to $4.2 billion from $2.4 billion.
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