SABMiller shares jump after trading update

SABMiller Plc, the world’s second-biggest brewer, said on Tuesday that earnings continued to grow despite some tough markets, giving its shares a boost, but brewing industry analysts were not all impressed.

“There’s no great news here. It looks pretty flat,” said James Williamson of SG Securities in London. Another analyst said the statement, which gave no hard figures, was merely in line with an update given at the end of July.

Shares in SABMiller, which brews Pilsner Urquell, Miller Light and Castle beers, were up 2,5% at 467-1/2 pence in morning trade.

“For the five months ended 31 August 2002, the group has delivered results and earnings per share ahead of the prior year—a very satisfactory performance in the light of the significant depreciation of some southern African currencies in 2001,” Chief Executive Graham Mackay said in a trading update.

SABMiller reports results in US dollars, but much of its profit is earned in weaker currencies.

Formerly South African Breweries, the group bought US-based Miller Brewing this year for $3,6-billion in shares and $2-billion in acquired debt to become the industry’s second biggest producer behind Anheuser-Busch.

The stock has fallen 17% since SAB announced its purchase of Miller at the end of May.

Mackay said results in Europe were especially pleasing, but South African beer volumes were down 0,7% on a year earlier and profitability in Central America was behind the group’s expectations.
Miller’s lager volumes for the two months since its purchase were also down but in line with expectations.

Williamson, of SG Securities, said he was expecting the company to report earnings per share of 51,8 US cents in the year to end-March 2003, compared with 48,7 cents a year earlier, and that, if anything, he was more likely to cut his estimates.

“My bias is down,” he said, citing the declining volumes in South Africa, increased competition in South America and a challenging task in improving the performance of Miller.

SABMiller said the fall in beer volumes in South Africa, which accounts for over 40% of sales, reflected the timing of Easter, which fell outside the current financial year, and that like-for-like volumes were “marginally positive”.

It said profits in local currency at its Beer South Africa subsidiary were ahead of a year earlier. But the rand has depreciated by about seven percent in the first five months of SABMiller’s current financial year, against a year earlier.

“In Central America, our businesses in Honduras and El Salvador have grown lager beer volumes although CSD (carbonated soft drink) volumes remain under competitive pressure,” it said.

“This, together with the region’s lacklustre economic performance, has resulted in profitability remaining behind our expectation. However, rationalisation and integration initiatives continue, and benefits from these activities are still to come.”

SABMiller said lower volumes from Miller had been offset by improvement in pricing and higher contract brewing volumes. “The integration of the business into the wider group is proceeding across a broad front,” it added. - Reuters

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