13th Nov 2014 11:35
LONDON (Alliance News) - Brewing giant SABMiller PLC Thursday reported higher first-half profit and revenue, driven by growth in Africa and Latin America, notably for soft drinks, but held back by weaker sales in China and tougher competition in Australia.
The company reported a pretax profit of USD2.83 billion for the six months to end-September, up from USD2.43 billion a year earlier, as revenue grew to USD11.37 billion, from USD11.10 billion, and the company continued to make cost savings.
"We anticipate that trading conditions will remain challenging but we expect to continue to grow volume and net producer revenue. Raw material unit input costs are expected to increase by low single digits in constant currency terms with some markets continuing to be impacted by foreign exchange movements on imported raw materials," the company said in a statement.
The brewer of brands including Peroni, Pilsner Urquell and Grolsch said total beverage volumes were up 1% on an organic basis, as 9% growth in soft drinks sales, driven by Africa, Latin America and Europe, offset a 1% decline in lager volumes.
Organic growth rates exclude the impact of acquisitions and disposals.
"We continued to grow earnings in the first half with challenging trading conditions mitigated by ongoing efficiencies. Group net producer revenue was driven by lager growth in Africa and Latin America and strong performance in our soft drinks businesses in Africa, Latin America and Europe. Lower lager sales in parts of Europe and Asia Pacific resulted in a small group EBITA margin decline during the half year," Chief Executive Alan Clark said in the statement.
The main reason behind the declines in lager volumes was weakness in China and Australia. Trading in Australia is being held back by increased trade investment activity and competitive price pressure, while in China, declines were driven by poor weather during the summer peak months, although some of this was offset by a more favourable mix from its premium lagers.
"Consumer sentiment [in Australia] remained negative with persistent concerns over the economic outlook. The continued pressure on consumer spending resulted in the beer category declining in the half year," said SABMiller.
Net producer revenue in Asia Pacific declined by 1% at organic, constant currency rates, while earnings before interest, taxes and amortisation declined by 15%. At reported rates, EBITA was down 17%.
In Europe, where net producer revenue grew by 1% at reported rates and 3% at constant currency rates, lager volume growth in Poland, the combined Czech Republic and Slovakia business and the UK, was offset by declines in Romania, Italy and Anadolu Efes.
Strong trading at SABMiller's US business MillerCoors drove profit gains in the North America region, as firmer pricing, a positive sales mix and new higher margin products like Miller Fortune and Smith & Forge Hard Cider offset a decline in larger volumes.
"The growth in sales of higher margin products, along with continued cost saving initiatives and maintained marketing spend, helped drive a 100 basis points improvement in EBITA [earnings before interest, taxes and amortisation] margin," the company said.
In Latin America, where growth was strong, particularly in soft drinks, the group said volumes rose 10% on an organic basis, driven mostly by its non-alcoholic malt brands, together with "further pack innovation". Net producer revenue was up 7% on a organic, constant currency basis, with earnings up 8%.
"Softer commodity prices, manufacturing efficiencies, distribution productivity and asset disposals further assisted our cost leverage, with reported margin improving by 70 basis points," it said.
SABMiller raised its interim dividend to 26.0 US cents, from 25.0 cents.
The market responded well to the brewer's interim results, with it shares trading 2.1% higher at 3,583.50 pence Thursday morning.
"We are well-placed to capture future top line growth opportunities in both emerging and developed markets and are making good initial progress on our plan to realise USD500 million from operational efficiencies and cost savings," said Clark.
SABMiller said it plans to make those USD500 million in savings per year by the March 2018.
Last month, the brewing giant signalled that it was looking to enhance and bolster its beer portfolio, after CEO Alan Clark told investors that he wants to attract more consumers by expanding its portfolio of flavoured beers and ciders. Clark said he hoping to convert wine and spirits drinkers to premium beer instead, developing and extending the range of the brewer's top-end beers and ciders while at the same time making sure it has a stable of affordable beers to sell in emerging markets.
By Steve McGrath and Rowena Harris-Doughty; [email protected]; @stevemcgrath1; [email protected]; @rharrisdoughty
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