• CEO says brewer doesn't have money to "burn"
  • Cost savings inflate H1 profits
  • Beer sales patchy in many regions
SABMillers CEO on the lookout for deals, analysts positive on H1

SABMiller's CEO on the lookout for deals, analysts positive on H1

SABMiller is in the market for acquisitions, but the brewer's CEO has said that the firm will not overspend in a bidding war.

The Peroni Nastro Azzurro brewer has watched the most recent brewing industry consolidation from the sidelines, but it has been linked this year with possible moves for Foster's Group's Australian beer business and the African beer business of France's Groupe Castel.

"We take a look at everything that's available," SABMiller's CEO, Graham Mackay, told just-drinks on the group's half-year results call today (18 November). However, he said that the brewer is "comfortable" with its relatively healthy balance sheet and will not break its strict financial discipline for a deal.

"It's not as if we have money burning a hole in our pockets," he said. Yet, SABMiller has the resources to finance a deal and a strong set of half-year results today could further speculation about the firm's intentions.

SABMiller increased earnings before interest, tax and amortisation (EBITA) by 13% in the six months to the end of September, to US$2.46bn, despite reporting a mere 1% rise in consumption of its beers during the period. Free cashflow, meanwhile, increased by $234m to $1.24bn at the end of the six-month period.

Cost savings, particularly at the firm's MillerCoors joint venture in North America, and higher beer prices combined to bolster the group against what Mackay described as "depressed" consumer markets in several regions. Net sales rose by 7% to $14.2bn.

Analysts reacted positively to the brewer's performance, as did the group's share price, which rose by almost 5% in morning trading on the London Stock Exchange. "Latin America and North America were the star performers, with profitability 7% and 6% ahead of our forecasts respectively," said analyst group Evolution Securities.

Sanford Bernstein was more subdued in its praise. "SABMiller delivered a strong set of numbers but not quite as strong as we had expected at the bottom-line," it said in a note.

Beer consumption is improving alongside national economies in many of SABMiller's emerging markets, according to the brewer. But, concerns remain over demand for beer in Latin America, which accounts for 30% of SABMiller's annual profits and where volume sales slipped "marginally" during the half-year. 

Mackay told just-drinks that a tax hike in Colombia, where SABMiller has a near-monopoly on the market via its Bavaria subsidiary, has "set us back a couple of years" in the country. "It was galling in a sense, because it came after several years of price restraint," he said of the Colombian Government's decision to raise value added tax on alcohol by 14% at the start of 2010.

SABMiller's beer sales fell by 7% in volume in Colombia for the half-year, although its performance in Latin America as a whole was buoyed by gains in Peru.

The brewer also faces problems in Central & Eastern Europe, where consumption of its beers fell by 5% during the half-year and EBITA fell by 7%. Mackay told journalists that the group has already "dramatically" cut costs out of its business in the region. He said the group is investing more in marketing and believes this will "pay off in the medium-term".

The brewer said that it expects to continue reaping rewards from cost savings and price increases in the second half of the year, although momentum will slow from the first-half.

For the full story on SABMiller's H1, click here.

To see an interview with Mackay from earlier today, click here.