Comment - SABMiller sitting pretty after Q3
SABMiller looking strong as enters Q4
SABMiller looks to be heading for a good financial year, even though consumers from Moscow to Bogota have continued to drink less of its beer in the company's third quarter.
Strong demand for beer across much of Africa and China helped SABMiller today (18 January) to report a 3% rise in beer sales by volume for the three months to the end of December. This marks an acceleration from the 1% rise in volumes in the first-half.
The Peroni brewer is sitting pretty as it heads into the fourth quarter and its share price was up by 1.5% on the London Stock Exchange by 1430 today (18 January). Net sales rose by 6% for the quarter, at constant currency, and there is every sign that profits remain buoyant. Cost savings have continued to flow, particularly from MillerCoors in the US.
"We expect profitability to accelerate in H2, boosted by early benefits from the 'Business Capability Program', savings on raw materials, and transactional FX," said analyst group Sanford Bernstein today.
A return to the fold for Zimbabwe in the last year, meanwhile, has generated extra volume at little extra cost.
No matter, then, that SABMiller's beer sales continued to ebb in parts of Eastern Europe, as well as North America and its key powerhouse in Latin America, Colombia.
This point does, however, show that the group's performance remains fragile around the edges. Latin America accounts for 30% of SABMiller's annual profits and the group will be keen to see Colombia settle down after a year that has seen a hike in alcohol tax, and poor weather lead to the Government declaring a state of emergency last month.
The same goes for Eastern Europe, where SABMiller has cut costs heavily but still saw EBITDA for the region fall by 7% in the first-half. Volume sales for Eastern Europe were flat in the third quarter.
Still, there are signs of improvement. SABMiller's division in Russia, for example, has held up better than many expected in the quarter, while the volume decline in the US appears to be slowing and the UK has continued to perform well from a small base.
"Momentum looks set to remain positive into the final quarter, with management pointing to "continuing improvement in economic conditions in emerging markets," said Evolution Securities in a note today. All the arrows, then, point to a solid year for the world's second largest brewer.
SABMiller's entry into Belgium's speciality beer market makes sense and more niche deals are likely across Europe's craft beer sector....
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