/ 23 March 2011

SABMiller upbeat over Africa’s thirst for beer

Africa’s biggest brewer SABMiller underlined its confidence in the continent on Tuesday by raising its revenue and margin targets after big investments in nations like Angola, Tanzania and Mozambique.

Strong economic and population growth is driving Africa’s thirst for beer, and after spending $1,5-billion over the last three to four years the brewer says it is now eyeing growth in new markets like Nigeria, southern Sudan and Ethiopia.

SABMiller’s Africa business unit, which excludes South Africa, earns 12 percent of group profits and is its fastest growing beer market along with Asia, with underlying beer volumes growing 12 percent in the last three months of 2010.

“Africa has good GDP growth, better governance and strong population growth, all conditions to do well,” said Mark Bowman, managing director of SABMiller Africa after an investor seminar on the continent in London.

The world’s number two brewer says that GDP in 2010 to 2013 for sub-Saharan Africa is set to grow nearly 5% a year compared to 3% for the world, while population growth for Africa’s one billion people project to grow at over 2% a year or around twice that of other areas like Asia.

As a result, the London-based brewer is upgrading its three to four year medium-term target for revenue per hectolitre of beer to see 3% to 5% annual growth in dollar terms from 1% to 3% previously, and earnings before interest, tax and amortisation (Ebita) margins to rise 0,8 to one percentage points a year after a previous flat target.

The group is holding its African beer volume growth target to see a high single-digit percentage rise per year, with the region’s beer consumption of seven litres per person a year well behind Europe’s 60 litres. All these targets start in the group’s next financial year to March 2012.

After big brewery investments in its top markets such as Angola and Tanzania, the group has recently moved into Nigeria, southern Sudan, the water market of Ethiopia and started accounting for its 37%-owned Zimbabwe unit as economic and political conditions start to slowly improve.

“The most interesting nations for the future look like Uganda, Zambia and Mozambique which all look on the cusp of good economic growth,” Bowman said.

SABMiller shares were flat at 2 008 pence at 1.30pm GMT. – Reuters