Weak currencies cap SABMiller growth

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SABMiller, the owner of Castle Lager, released annual results yesterday. The brewer said its local operation performed well in an environment of subdued consumer demand and a weakening rand. Photo: Supplied

Ayanda Mdluli

SABMiller’s results for the year to March illustrated a positive performance from the second-largest beer manufacturer, considering that currencies of emerging markets have been under pressure.

Addressing the media yesterday, chief executive Alan Clark said the depreciation of key currencies against the dollar had a major negative impact on the translation of the group’s financial results, which affected earnings before interest, tax and amortisation (Ebita) by about $400 million (R4.1 billion).

The company said adjusted earnings a share increased by 2 percent to $2.42.

The performance was achieved “in the face of a number of headwinds”, such as the depreciation of the rand, Colombian peso and Australian dollar. In constant currency, organic Ebita grew 7 percent and margins improved strongly.

The group posted net producer revenue growth of 3 percent, which was led by the company’s developing market businesses in Africa and Latin America, and SABMiller’s partnerships in China, where the company sustained capacity to ensure selective price increases and the growth of its premium brand portfolios.

Group net producer revenue from beverages in South Africa grew to R40.5bn from R38.1bn previously (including 6 percent organic growth).

Commenting on the results, Clark said SABMiller would continue to “innovate and rejuvenate” its products and build on its position in growth markets, while increasing the efficiency of the group’s operations. With this approach I believe we are well placed to continue to deliver strong returns to shareholders.”

Outgoing SA Breweries executive chairman Norman Adami said the local beer and soft drinks businesses had performed well in a highly volatile external environment of subdued consumer demand, as well as a weakening rand.

“Our strategy has allowed us to manage these factors and established a clear foundation for future profitable growth.”

He took a swipe at brandhouse, SABMiller’s main local beer competitor, which had experienced 20 percent to 35 percent growth levels at inception between 2008 and 2009.

“They believed that they were unstoppable, but if we look at the competition situation now, it is a different story. They are making heavy losses and have lost market share, so we have dealt with our competitive threat effectively.”

Adami said emerging markets had experienced “sluggish economic growth”, and strong competition and rising costs due to the continued weakness of the rand and the timing of the Easter weekend.

“As a result, volume growth in both the beer and soft drinks portfolios was subdued. A strong focus on cost containment helped fund investment in market facing operations, and there were ongoing controls on working capital and capital expenditure,” he said.

Jean Pierre Verster, an equity analyst at 36One Asset Management, said Africa would be a source of growth for many years to come for the company. But SABMiller still had to come to grips with affordability, which was a major issue given the low levels of income across the continent.

SABMiller rose 2.64 percent to R586.92 on the JSE yesterday.


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