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SABMiller Reports Full-Year Profits Up 22.7 Percent |
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Thursday, 15 May 2008 |
LONDON: SABMiller PLC, the world's No. 3 brewer, posted an 22 percent rise in full year net profit on Thursday as price rises and strong beer sales in eastern Europe and the United States offset increases in raw-materials costs.
The brewer of brands including Peroni, Pilsner Urquel and Castle reported earnings of US$2.02 billion (euro1.3 billion) for the year ending March 31, compared to US$1.65 billion in the previous year.
Revenue was up 15 percent to US$21.4 billion (euro13.85 billion). SABMiller does not break out fourth-quarter results.
The company said it expects input costs to rise further in 2008 - the industry as a whole is contending with sharp rises in the cost of both barley for brewing and aluminum for cans - but prices rises and mix benefits would again compensate.
SABMiller is also less exposed to aluminum cost pressures than its rivals due to its large presence in developing countries, where beer is usually sold in returnable glass bottles.
Chief Executive Graham Mackay said input costs rose by 6 percent over last year, with raw materials rising 9 percent. In the current year, Mackay said the rise would be "a few percentage points higher than that," with raw material costs rising in "the low double digits."
"We would seek to recover at least those absolute increases through price increases," he said.
However, he added that it would be very difficult, if not impossible, to maintain gross margins in the current environment.
Still, the company said that "the economic outlook across our global footprint, which is biased towards growth markets in developing countries, remains positive."
Blue Oar analyst Bruce Davidson said the results demonstrated the benefits of strong brands and market share when faced with rising input costs.
"These cost pressures are not likely to abate, but nor are the company's efforts to keep margins up," he said.
The results were well received by the market, with SABMiller shares rising 3.4 percent to 1,244 pence (US$24.20; euro15.64).
SABMiller's acquisition of Dutch brewer Royal Grolsch NV in February contributed to volume gains and the company plans to introduce the brand in a number of its markets over the next year.
It is hoping that Grolsch will take up some of the market share lost in its home South African market when SABMiller lost its deal to brew and sell Heineken's Amstel brand there.
The loss of the brand, which had accounted for 9 percent of the South African market, is expected to cost SABMiller sales worth US$300 million (euro193.87 million) and profit of US$80 million (euro51.7 million) in both 2008 and 2009.
Heineken is now selling Amstel itself in South Africa through a joint venture with Diageo PLC
An agreement for SABMiller and Molson Coors Brewing Co. to combine their U.S. and Puerto Rican operations in a joint venture is expected to be completed the middle of this year.
The company said that North American sales grew 5 percent to US$5.12 billion (euro3.31 billion) over the year, benefiting from the launch of Miller Chill, a beer brewed with lime and salt.
Mackay said the U.S. business had proved very resilient to the economic pressures, despite noting some slowing in demand for premium products.
"We're not at all gloomy about the consumer economy we operate in the U.S.," he said.
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