SABMiller said on Thursday that its financial performance was in line with management’s expectations as good revenue growth was partially offset by higher input costs and increased investment across the business.
The group said in a trading update ahead of the release of its full year financial results on May 17, that for the year to end March it recorded 23% growth in lager volumes, with strong organic growth of about 10%.
The organic growth includes volumes for South America from 12 October 2006, 12 months after it became part of the group.
The I-Net Bridge consensus forecast is for SABMiller to report full year headline earnings per share of 832 cents and a dividend of 347,4 cents.
Speaking during a conference call, chief financial officer Malcolm Wyman said the higher input costs included increased raw material and packaging costs.
He said substantially higher aluminium prices had impacted Miller’s profitability in the United States.
He added that barley prices were also substantially higher due to drought conditions in Australia and lower tonnages in Europe.
Wyman noted that barley prices would be watched closely to see whether this was a major structural change or a cyclical issue. He noted that land used for barley was moving to biofuel crops, but expressed hope that barley tonnages would increase as the weather improves.
Referring to the increased investments across the group’s businesses, Wyman noted that SABMiller had increased its marketing activities, particularly in South America where it is upgrading its beer portfolio, including brand renovations and launches.
He said marketing costs had increased across all the countries. In Europe, which is a very competitive market, the group had increased marketing at the point of purchase, while in South Africa it had also upped its level of marketing expenditure and this was expected to increase further as SAB adjusts to the removal of the Amstel brand from its portfolio.
Wyman said there were early signs of a pick up in sales of the group’s other brands as it was still early days for Heineken to get the Amstel product into the South African market.
He said that while a substantial portion of Amstel volumes would be lost to SABMiller, the group expected to pick up at least half of that volume through its other brands.
While Amstel drinkers are expected to move back to the brand as Heineken provides stock to local consumers, SABMiller expects its new offering — Hansa Gold, a premium product in the same category as Amstel, to do well.
SA Beverages no longer brews, markets or distributes the Amstel brand in South Africa, but this has not had an impact in the current year, the group said.
Earlier this year Heineken terminated SAB’s licence to manufacture and distribute Amstel after a private arbitration panel found that SABMiller’s transaction in South America in 2005 constituted a material change in shareholding of the group which could be regarded as inimical to the interests of the Heineken group.
Sales volumes of Amstel represented approximately 9% of beer sales volumes in South Africa. The sales of the Amstel brand would constitute approximately $300-million of SA Beverages’ revenues for the year to March 2007, SABMiller said at the time of the announcement.
For the 2008 financial year, and going forward, the company expected to mitigate the financial impact on its earnings of the Amstel licence termination through several initiatives, but nevertheless, it said, there would still be a negative financial impact.
In the current financial year, on a pro-forma basis, SABMiller expects that this would have been about $80-million of EBITA, equivalent to pro-forma earnings of approximately three US cents per SABMiller share. It would expect the impact in the next financial year to be of the same order, it said in March.
At 10.20am local time SABMiller’s share price was up 2,05%, or R3,23 rand, at R160,80. ‒ I-Net Bridge