SABMiller sitting pretty after full-year sales rise

SABMiller sitting pretty after full-year sales rise

SABMiller is looking in good shape at the end of its most recent financial year, thanks to strong consumer demand for beer in Africa, Asia and Latin America. In this impromptu mid-week Spotlight, just-drinks looks at the initial market reaction.

The Peroni Nastro Azzurro brewer's net sales for the 12 months to the end of March rose by 5%, with volumes up by 2% on the previous year, it said today (19 April).

Volumes in Africa shot up by 13%, including a 4% contributing from newly-added Zimbabwe. Meanwhile, the group's volumes in Asia rose by 8%. Latin America managed to come in flat, which marks an achievement considering the group's trials and tribulations with a tax hike in Colombia, one of its key markets in the region.

The brewer beat most analysts' expectations and has whet appetites ahead of its full results statement, due on 19 May.

"We believe that the underlying profit picture is even better than the +2% volumes imply," said Sanford C Bernstein.

"Firstly, SAB should benefit from country mix, with strong volume growth in higher-margin regions. Secondly, we expect SAB to benefit from lower input costs across the year, as alluded to by management," Bernstein said. It predicted double-digit growth in organic EBIT for the year.

Furthermore, Morningstar analyst Philip Gorham said that both Africa and Asia "present attractive long-term opportunities for SABMiller, with large sections of these markets yet to trade up to branded beer".

SABMiller's share price rose by 1.3% on the London Stock Exchange following today's trading statement.

However, Gorham warned that, while the outlook is broadly positive, all is not roses. "In fiscal 2012, we expect premiumisation and per capita consumption growth in emerging markets to drive growth, but increasing volume and raising prices will likely remain difficult in North America and Western Europe."

North America was, inevitably, a weakspot for SABMiller in the past 12 months. MillerCoors, its joint venture with Molson Coors in the US, reported volumes down by around 2.5% as consumers continued to shun mainstream beer.

Given this, Gorham said that SABMiller's valuation looks generous, despite strong prospects in emerging markets. "With the stock trading at 18 times our estimate of fiscal 2012 earnings," he said, "we think the market is overlooking the prolonged impact that high unemployment, austerity measures and rising gas prices will have on mature markets, as well as the structural decline of mass-produced brands in the US."

There are, however, some positives to be taken from the US, where the beer market decline has slowed over recent months. "We take SABMiller’s US performance, along with healthy industry pricing and improving mix, as a positive signal regarding the industry," said analyst group Stifel Nicolaus.

The US will doubtless remain a talking point as SABMiller enters its new year. However, strong momentum across high margin markets with yet more growth potential have put the brewer on a good footing.