/ 1 January 2002

US drinkers boost SABMiller profits

Brewing giant SABMiller Plc reported a 24% rise in half-year profits on Thursday and said it would cut costs in a bid to win over American beer drinkers.

The world’s No. 2 brewer — which produces Pilsner Urquell, Miller Lite and Castle beers — reported pre-tax profits of $374-million for the six months to September 30.

London-based SABMiller said adjusted pre-tax profit was $491-million, exceeding analysts’ forecasts of $417-470 million.

Results were boosted by the inclusion of nearly three months of profits from US number two brewer Miller, which SAB bought for $5,6-billion in early July. That acquisition pushed it up to just behind global leader Anheuser-Busch.

”Whilst Miller had a difficult three months to September 30, we are confident that it will live up to our long term expectations and will deliver synergies for the group in excess of the initial estimate of $50-million in year three,” said Chief Executive Graham Mackay in a results statement.

SABMiller is a major brewer in emerging markets such as Africa, eastern Europe and China and its earnings in weak currencies suffer on conversion into US dollars. The Miller deal was set to address this problem, but it means taking on Budweiser-brewer Anheuser-Busch in its own backyard.

The South African rand has been relatively stable throughout the reporting period, though it is still some 25% down on the prior year against the US dollar.

The group has been in expansion mode since moving its headquarters and main share listing to London in March 1999, expanding in the Czech Republic, China, Honduras and then the United States, while selling off non-beer interests in South Africa — its former base.

”We continue to explore opportunities across a wide front as the world brewing industry shows evidence of further consolidation,” Mackay added in the statement.

Miller brews around a fifth of US beer, the world’s biggest market, but Anheuser has almost half the market, and Miller faces a tough task reversing years of decline against a well-established industry leader.

Shares in SABMiller have underperformed the FTSE 100 by two percent and the Dow Jones European food and drinks index by six percent since the Miller deal was announced in late May. The shares were down two percent on Thursday.

The shares have stayed weak since July when the company tried to raise around $614-million with a 120-million share placement. It pulled the plan at the last minute but still has authority to issue 170-million shares, or 14% of its issued equity.

The half-year dividend was steady at 6,5 US cents a share. – Reuters