Update - MillerCoors Q3 boosts SABMiller outlook, say analysts

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  • MillerCoors profits beat expectations
  • SABMiller to see benefits
  • Unemployment weighs on beer volumes - CEO

SABMiller's full-year earnings are likely to get a boost from strong third-quarter profits growth at the brewer's joint venture with Molson Coors in the US, MillerCoors.

MillerCoors sold less beer in the US in the third quarter of 2010 as consumers continued to reign in their spending in uncertain economic times. But, cost savings helped the brewer to beat earnings expectations. Operating profits rose by 38% on the third quarter of 2009, to US$320.8m, and net profits increased by 36% to $313m, the firm said today (3 November).


The firm's performance bodes well for SABMiller, which controls 58% of MillerCoors, the second largest brewer in the US. "From a cost point of view," said analysts at Evolution Securities, "today's Q3 results are impressive."

MillerCoors' like-for-like earnings before interest and tax were 19% higher than Evolution's estimated. "This will continue into the final quarter of the year and should prompt small upgrades to SABMiller's consensus earnings today," said Evolution.

Despite this, SABMiller's share price dipped slightly (0.2%) following the MillerCoors announcement, likely due to ongoing tough conditions on the US beer market. Lower day-to-day costs ensured that MillerCoors' net sales crept up by 0.3% for the quarter, to $2.015bn, but demand for its beers continued to slide.

MillerCoors' CEO, Leo Kiely, said that he saw improvements in the premium light lager category during the quarter, as well as ongoing momentum for the group's smaller-volume 'craft beers', such as Blue Moon. The group also managed to follow rival Anheuser-Busch InBev in raising beer prices in October.

However, MillerCoors' management team told analysts today that a significant upturn in US beer consumption would not happen while unemployment levels remain high. Kiely estimated that close to 15% of MillerCoors' "key beer drinker demographic" was unemployed. "That's got to turn around before we see the total category become more buoyant," he said on the firm's results conference call.

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