13th May 2015 10:57
LONDON (Alliance News) - SABMiller PLC Wednesday reported a flat pretax profit in its recently-ended financial year, as a hit from the strong US dollar offset underlying revenue growth of 6%, and it said it will continue to be buffeted by currency volatility and challenging conditions in its markets in the current year.
Still, the brewing giant's shares were up 2.1% at 75.00 pence Wednesday morning as analysts said the results had come in slightly above expectations and the company is still attracting a premium because markets think it could be a takeover target.
The brewer of brands including Grolsch, Peroni, Coors Light beers and Bulmers cider reported a pretax profit for the year ended March 31 of USD4.8 million, flat on the year before, as revenue fell to USD22.1 million, from USD22.3 million. It said the strong dollar had a negative translation on its operating currencies.
However, if exchange rates had remained constant, revenue would have risen 6%, driven by 8% growth in soft drink volumes. Its lager volumes were flat as growth in Africa and Latin America was offset by lower volumes in China and North America.
SABMiller will pay a full-year dividend of 113.0 cents, up 8% on the year before.
Pretax profit stayed flat despite the overall revenue decline because it booked a charge of USD153 million, lower than the USD202 million charge in the year before, on costs relating to joint ventures, an impairment of its business in India, and its Foster's and Pacific Beverages acquisitions in Asia Pacific.
The biggest charge was a USD313 million impairment for its Indian business, which it said resulted from increasing regulatory and excise challenges in the country, followed by USD139 million in integration and restructuring costs relating to the Foster's and Pacific Beverages acquisitions. However, it also made a USD401 million gain on the disposal of its investment in African gaming, hotel and entertainment group Tsogo Sun.
"We anticipate that the trading environment will remain challenging and that our business will continue to be impacted by currency volatility. However, we are confident in our strategy to drive superior long-term growth and we will continue to invest in production capacity and capability, particularly in growth markets," the company said in its outlook statement.
It said it expects raw material unit input costs to increase by low single digits in constant currency terms, with some markets continuing to be hit by the impact of foreign exchange movements on imported raw material costs.
SABMiller is offsetting the challenges in its lager markets by expanding its soft drinks bottling business, and by cutting costs. It said it made cost savings of USD221 million in the last financial year and is on track to deliver its targeted savings of USD500 million a year by fiscal 2018.
Regionally, net producer revenue rose 7% in Latin America thanks to selective lager price increases, growth above mainstream lager categories and lager affordability initiatives in Colombia and Honduras, together with strong volume growth in soft drinks.
In Africa, net producer revenue rose 9%, reflecting "lager share gains across a number of markets, volume growth, selective pricing and continued premiumisation in lager", SABMiller said, adding that strong growth in soft drinks arose from price moderation and good retail execution.
While China and North America both experienced volume declines, the former returned to growth during the last three months of the year, SAB Miller said, although it still offset the stronger performances in Africa and Latin America.
"Soft drinks continue to be a standout performer, with excellent volume growth across Africa, Latin America and Europe," the company said.
It bolstered its soft drinks business last November, when it said it would combine its soft drinks bottling business in Southern and East Africa with those of Coca-Cola Co and the majority shareholders in an existing South African Coca-Cola bottling business to create a company that accounts for about 40% of all Coca-Cola beverage volumes in Africa. SABMiller owns 57% of the new company, which has operations in 12 markets across southern and east Africa and bottles about 729 million unit cases a year.
Soft drinks volumes in Africa rose 9% in the financial year, SAB Miller said, adding that the integration of the business is progressing well.
Numis said SABMiller's earnings were slightly ahead of its expectations but said its outlook for 2016 looks lacklustre, with good prospects in Africa offset by a backdrop of increased competition and difficult trading conditions in its key Latin America market and tough North American and European markets.
The broker says its Buy recommendation on Numis is predicated on it being an industry consolidation target.
SABMiller is the world's second-largest brewer behind Anheuser-Busch InBev. Last year, Dutch brewer Heineken NV rejected a takeover approach from SABMiller, leading to speculation that the Anglo-South African company's failure to boost its size could then lead to an approach from AB InBev.
By Karolina Kaminska; [email protected] @KarolinaAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
SAB.L