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SABMiller produces a special brew of strong results
World number two brewer SABMiller expects a second-half boost from currency movements and a fall in the cost of inputs such as barley after price rises and cost cuts pushed up its first-half profits.
The London-based brewer of Miller Lite, Peroni and Grolsch beers said yesterday it expected raw material costs to begin to ease towards the end of this year, while its second half should also benefit from foreign exchange rate movements.
The brewer's first-half profit increased 6 per cent, beating analysts' average forecast, as beer price rises and cost savings helped offset a 1 per cent fall in underlying volumes.
Chief executive Graham Mackay said trading was likely to remain difficult, with unemployment rising and retail spending depressed, but it should see a substantial benefit from currency in its second half and some unwinding of commodity contracts.
"Trading conditions will not change much in the second half, with only perhaps a slightly firmer undertone," Mr Mackay said.
The brewer reported adjusted earnings per share of 80 US cents for the six months to end-September, compared with average forecasts of 71 cents, while the half-year dividend rose 6 per cent to 17 cents a share.
"An outstanding set of H1 results from SABMiller, 17 per cent ahead of our forecast at the EPS level...," said analyst Matthew Webb at brokers Cazenove.
He said he was provisionally upgrading his earnings forecast for the current year to March 2010 and March 2011 by 6 per cent as he said the group was navigating the recession very successfully.
"SABMiller trades on a 10 per cent premium to the sector, which is more than justified by the strong results and the long-term potential of the business," said analyst Chris Pitcher at brokers Redburn Partners.
SABMiller, which earns nearly 90 per cent of its profits from emerging markets such as South Africa, Colombia, Poland and China, has been tipped by analysts as the front-runner to buy Mexico's second-biggest brewer FEMSA Cerveza, which could fetch $7.5bn or more.
Mr Mackay declined to comment specifically on FEMSA, the brewer of Sol and Tecate beers, but said the group would look at any acquisitions which gave "value growth opportunities".
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