Johannesburg - The SABMiller share price gained 4 percent yesterday to close at R499.40 following the release of a better-than-expected trading update for the six months to September with lager volumes up 1 percent.
The improvement in sentiment towards the share, which had taken a hit since the release of a quarterly update in July revealed lager volumes were down 1 percent, might also have been helped by the weaker-than-expected first-quarter sales growth figures released yesterday by UK-based spirits giant Diageo.
Diageo, which owns Johnnie Walker whisky and Guinness beer, attributed its weaker-than-expected results to disappointing performances in its emerging market business.
Although SABMiller’s growth figures were ahead of expectations, management warned that the depreciation of key currencies against the dollar during the six-month period would adversely affect the profit figures, which would be released next month.
The strengthening share price offered some respite from the considerably weaker sentiment that has hit the share price during the past three weeks and has taken it from a high of R518.89 reached at the end of September to a low of about R470 reached last week.
SABMiller chief executive Alan Clark said the group achieved a strong performance across its African business “and made good progress on building on our positions in Latin America, South Africa and the Asia-Pacific region”.
There was some recovery from the grim trading conditions that knocked performance in Europe and North America. However, Clark warned that the “consumer environments in both Europe and North America” were expected to remain under pressure. The impact of the weak consumer conditions in the first quarter were aggravated by the particular bad weather conditions in the northern hemisphere.
Clark noted, “despite current prevailing uncertainties about developing market economies, we remain confident in the long-term growth prospects for the group”. SABMiller has a higher exposure to developing economies than any other global beer producer, with about 75 percent of its sales derived from those economies.
In South Africa, volumes increased by 3 percent despite subdued consumer spending and the absence of an Easter period. Lager volumes grew strongly as a result of more aggressive market activity and enhanced retail execution. The 3 percent increase for the six months indicates a strong performance in the three months to September, as SABMiller had reported unchanged lager volumes in the first three months. “Castle Lite and Castle Lager continued to perform well along with Carling Black label, returning to growth although their volume gains were partially offset by a decline in Hansa Pilsner volumes.
“Soft drinks volumes grew by 1 percent in a challenging trading environment,” SABMiller said in a statement issued yesterday.
Africa was again the star performer with lager volumes up 9 percent.
Tanzania, Mozambique, Zambia and Nigeria were particularly strong.
In Latin America, the first quarter volume increase of 2 percent was cut back to a 1 percent increase for the six months. The slower second-quarter performance was attributed to “disruptive events in Colombia” together with relatively softer economic conditions across the region. In Colombia, where general elections are due to take place next year, lager volumes were adversely affected by national strikes and social unrest during July and August.
Management said that SABMiller’s financial performance, the details of which will be announced next month, was in line with expectations. - Business Report