Miller time for brewer as it beats sales forecasts

Brewing giant SABMiller is cheering a forecast-beating rise in volumes, boosted by growth in Africa and Asia, and said it saw continued improvement in economic conditions in many of its emerging markets.

The maker of Miller Lite, Peroni and Grolsch yesterday posted a 3 per cent rise in quarterly volumes while higher beer prices helped boost revenues by 6 per cent.

With much of its focus on fast-growing emerging markets, the group has escaped most of the tough times seen by rivals with large exposures to flat European beer markets. However, like its peers, SABMiller is having to face up to rising input costs as barley and corn prices remain volatile.

The third-quarter update showed that strong volume growth in Asia and Africa had offset volume dips in both North and South America. The October-December period is heavily dependent on summer beer drinking in the southern markets of South Africa and Latin America.

The big surprise came in Europe where quarterly volumes were flat after forecasts for a continued fall. Growth in the UK and Ukraine helped offset falls in Russia and the Czech Republic as the brewer's premium brands, Pilsner Urquell and Grolsch, sold well during the period.

Simon Hales, an analyst at brokerage Evolution Securities, said: "Trading momentum, as evidenced by today's trading update from SABMiller remains strong; while regional comments from the group reinforces our pecking order among the brewers - SABMiller is our top pick in beer."

Investors had been looking for volume growth of about 1.6 per cent in Q3 after the group's first-half - April to September - saw a 1 per cent rise.

Second-quarter volumes had been up 3 per cent after a dip of 1 per cent in the first quarter.

Analysts said the brewer, which earns about four-fifths of its profits in emerging markets, is seeing trading pick up in most areas including South Africa, Poland, China and Peru while its biggest mature market of the United States remains tough.

SABMiller, which was known as South African Breweries until a merger in 2002 with US-based Miller Brewing, said it had benefited in the quarter from lower costs of barley, glass and aluminium, but still expects costs to edge up in its new financial year.

The group, which also brews Castle, Snow and Aquila beers, said underlying volumes rose 12 per cent both in Africa and Asia, were 3 per cent up in South Africa, unchanged in Europe and down 1 per cent in Latin America.

In the US, where it formed the MillerCoors joint venture in July 2008, sales to retailers fell 2.5 per cent in testing industry and economic conditions.

The group added that its soft drinks volumes for the quarter were up 5 per cent on an underlying basis.Shore Capital analyst Phil Carroll said that overall it appeared to be a "good statement" from the brewer outlining a "better than expected performance".

Japanese broker Nomura, which has a "reduce" rating on the shares, said it remained cautious about SABMiller's ability to achieve a return to historical growth rates. "Despite some signs of an early improvement in volumes in the third quarter, we retain our cautious stance on SABMiller given high expectations of a renewal of volume growth towards historical levels, whereas we believe that volume growth is likely to be more normalised in future," the broker noted.

Other big brewers due to report their 2010 results over the coming weeks include Heineken on 16 February and Anheuser-Busch InBev on 3 March.