Bloomberg News

SABMiller Profit Gains as Asia, Africa Offset Europe, U.S.

November 17, 2011

(Updates with analyst comment in fourth paragraph.)

Nov. 17 (Bloomberg) -- SABMiller Plc, the brewer buying Australia’s Foster’s Group Ltd. for $10 billion, reported a 9.5 percent increase in first-half profit as growth in emerging markets offset declining profitability in the U.S. and Europe.

Earnings before interest, taxes and amortization rose to $2.7 billion, the London-based company said today, compared with the $2.72 billion median estimate of 10 analysts surveyed by Bloomberg News. Revenue was $15.7 billion, representing growth of 6 percent excluding acquisitions and currency shifts, though the profit margin contracted amid rising raw-material costs.

Business conditions will remain the same for the rest of the year, Chief Executive Officer Graham Mackay said, with “difficult” markets in the U.S. and Europe being offset by “favorable” conditions in Latin America and Africa. SABMiller said it will raise prices “selectively” in the second half as raw-material costs increase at a “slightly faster rate.”

“This reads as a bit cautious compared to where the market will be on the outlook,” said Martin Deboo, an analyst at Investec Securities in London. “They need pricing to recover the commodity impact, which is going to make the second half more of a challenge than expected.”

SABMiller fell 1.5 percent to 2,199 pence at 10:11 a.m. in London, mirroring the broader market. The shares had slid 1.1 percent this year as of the close of trading yesterday.

Profit Margin

The Ebita margin, a measure of profitability, narrowed 10 basis points to 17.2 percent in the first half, less than the median analyst estimate of 17.5 percent. Margins will remain “broadly flat in the second half, although that’s a little bit hard to call with absolute precision,” Mackay said today on a conference call with journalists.

The maker of Peroni maintained a forecast for a “low single-digit” increase in commodity costs for the year.

Profitability slid in Europe and North America, where government cuts to address budget deficits are squeezing consumer spending. Organic Ebita, which excludes acquisitions and currency fluctuations, declined 6 percent in both regions.

SABMiller also said today it will invest $295 million building its operations in Peru and $260 million expanding in Africa. The company agreed to buy Foster’s in September and the following month announced plans to acquire a stake in Turkey’s Anadolu Efes Biracilik & Malt Sanayii AS.

InBev Speculation

Mackay declined to comment on whether the company would increase prices in the U.S., where he said beer sales are being restricted by high unemployment among semi-skilled and unskilled laborers. Business in the country will “take a while to come back,” he said, although “I don’t think Europe and America are going to stay in the doldrums forever.”

So-called organic beer volume rose 3 percent in the first half, SABMiller said last month.

Organic Ebita increased 16 percent in Latin America, the brewer’s biggest region, as the company boosted sales of more- expensive beers. SABMiller, which started out selling beer to gold prospectors in South Africa, improved profitability at the unit in the first half.

The company said today that the South African rand “and some other key operating currencies” had weakened against the dollar, and that its financial position is “strong.”

Mackay declined to comment on speculation that larger competitor Anheuser-Busch InBev NV may consider bidding for the company. SABMiller shares advanced the most in almost three years in October after a Brazilian news website reported that the brewer was in talks to be bought by AB InBev.

“What we do is run the business, and we make sure it’s run as well as possible,” the CEO said.

--Editors: Paul Jarvis, Robert Valpuesta

To contact the reporter on this story: Clementine Fletcher in London at

To contact the editor responsible for this story: Sara Marley at

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