Beer, soft drinks drive SABMiller growth

Independent.

High volumes of beer and soft drinks consumed by the African and Latin American markets drove SABMilller’s growth, while the Asian Pacific market lagged behind. Despite this, the world’s second largest brewing company believed that trading conditions ahead will remain challenging.

It said that while its top line growth was powered by Africa and Latin America, other markets such as China and Australia recorded much lower volume. SABMiller manufactures alcoholic and soft drink beverages in Latin America, Africa, Europe and Asia, among other markets.

SABMiller joins other consumer-orientated businesses in reporting disappointing earnings in the third quarter as a spending slowdown in Asia compounds stagnant growth at home.

The breweries’ organic earnings before interest, taxes and amortisation (Ebita) grew 3 percent in the six months to September. The company said total beverage volumes for the six-month period to September grew by 1 percent, with larger volumes down by 1 percent. Revenue grew by 5 percent, “driven by developing market operations in Latin American and Africa”, it said.

SABMiller chief executive Alan Clark said: “We continue 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.”

Ron Klipin, a portfolio manager at Cratos Wealth, said unlike its competitors such as the industry leader Anheuser-Busch InBev, SABMiller had made strides in the emerging markets including Africa, Latin America and Asia.

“Emerging markets have been recording a far more robust growth compared to their developed peers. But if one looks at the developed world like Europe there has been a lack in these markets’ growth, except for some pockets of growth emerging in East Europe,” said Klipin.

He said in many emerging markets growth in disposable income had been evident which means that there was a more buoyant growth in consumption expenditure.

“This is the benefit of SABMiller’s footprint in these emerging markets, compared to its competitors, who are much more reliant in developed markets.”

In Africa the group’s Ebita grew by 3 percent or 9 percent on an organic, constant currency basis.

This was driven by volume growth, pricing and a focus on cost productivity.

“Castle Lite led the robust premium performance and we also grew strongly in the affordable segment,” the group said. Despite the weak consumer environment in South Africa, SABMiller benefited from the volume growth in lager and soft drink beverages. With Castle Lite, Castle Milk Stout and Castle Lager leading the pack.

Soft drinks volumes grew by 9 percent underpinned by price restraints and pack innovation.

In Tanzania and Zambia newly imposed excess regulation resulted in lager volume decline of 7 percent and 16 percent, respectively. But Nigeria recorded robust lager volume growth.

Traditional beer in Zimbabwe, Chibuku Super continued to perform and was now available throughout the country.

The Australian market recorded 1 percent less in volume growth while volumes in China slid by 3 percent.

Lager volumes in the European market remained at the same level as the previous period. – Additional reporting by Bloomberg