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Analysis - SABMiller's LatAm aim? Drink more beer

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Finding a way to get the people of Latin America to drink more beer is the latest challenge for SABMiller.

Earlier this week, at the company's latest quarterly divisional seminar, SABMiller’s Latin America president Karl Lippert told investors that there remains considerable room for growth in the region. Then, following the seminar, Nomura reaffirmed its SABMiller rating as 'neutral'.

The gains in the region are promising in the long term, according to Nomura analyst Edward Mundy. "The more cautious margin guidance in the LatAm seminar reflects a high profit base and a sensible strategy that favours longer-term growth ahead of maximising near-term profitability," he says in a note after the briefing.

This, coupled with weaker trends in the US and recent adverse ForEx movements, caused Nomura to cut its earnings-per-share estimate for fiscal-2016 by 3%. Also, the "lower probability" of a move by Anheuser-Busch InBev for the brewer influenced Noumra's decision.

But, believes Mundy, there is strong potential for SABMiller when it comes to growing per capita consumption in the region. According to the brewer, per capita consumption of beer in its key markets of Colombia, Peru and Ecuador is currently around 43 litres per year, and is less than half that rate in Honduras and El Salvador. "In comparison with other markets in the region, such as Panama, Brazil and Mexico, where PCC sits between 65 and 70 litres, there is still considerable room for growth," the company said.

Nomura’s Mundy adds: "Although macro uncertainty may act as a restraint on profit growth in the short term, over the longer term we see a robust outlook here given low per capita consumption in SAB’s key markets and strong execution," he added.

Perhaps SABMiller can instigate some kind of country twinning programme for LatAm's markets with the Czech Republic - per capita beer consumption there is 143 litres.


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