City raises a toast to SABMiller's 'outstanding' results despite 25% fall

Published on Thursday 19 November 2009 21:18

SHARES in brewing giant SABMiller received a boost yesterday as interim profits came in above forecasts and investors welcomed a robust outlook for the second half.

The world's second-biggest beer producer and owner of brands including Miller, Peroni and Grolsh said the strength of the dollar caused first-half pre-tax profits to slide 26 per cent to $1.5 billion (893 million).

However, the underlying performance was strong with adjusted earnings up 10 per cent to $1.24bn on the back of increased market share.

The results beat City expectations, while the brewer said more favourable exchange rates and lower raw material costs, such as barley, should lift its second half.

Chief executive Graham Mackay said: "In some of the toughest economic conditions seen for decades, we have continued to take share in a number of markets.

"The weakness of our major operating currencies against the dollar has affected reported results, but we have continued to generate a strong underlying performance."

The group reported adjusted earnings per share (EPS) of 80 cents for the six months to the end of September, compared with average forecasts of 71 cents, while the half-year dividend rose 6 per cent to 17 cents a share. Matthew Webb, an analyst at brokerage Cazenove, said: "An outstanding set of H1 results from SABMiller, 17 per cent ahead of our forecast at the EPS level … we expect the shares to go higher despite their recent strong run."

Shares last night closed 3.4 per cent higher at 1,714p.

Webb said he was provisionally upgrading his earnings forecast for the current year to March 2010 and March 2011 by 6 per cent, noting that the global brewer was navigating the recession successfully.

Chris Pitcher, at broker Redburn Partners, added: "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."

The group said Miller Brands, its UK operation, continued to grow despite a market that saw premium lager sales decline by 3 per cent over the same period. It said Peroni Nastro Azzurro delivered 36 per cent year-on-year volume growth, the equivalent of more than 23 million additional bottles. Pilsner Urquell grew volumes by 26 per cent.

Nick Miller, managing director of Miller Brands, said: "We will continue to build and nurture differentiated brands that deliver a top-quality drinking experience for our consumers and margin opportunities for our customers."

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.