Tuesday, 29 May 2012 - 20:00
SABMiller Annual Results ? Expanding Rapidly
SABMiller released its annual results for the year ended 31 March 2012 last Thursday, once again reporting strong numbers and managing to grow their volumes despite economies struggling worldwide.
SABMiller is one of the world’s largest brewers, with a global presence in more than 75 countries and a portfolio of more than 200 local and international beer brands including Aguila, Castle, Pilsner Urquell, Peroni, Miller Genuine Draft, and Grolsch. The group also bottles soft drinks, and is one of the world’s largest bottlers of Coca-Cola products.
Highlights from the group’s results include a 13% increase in adjusted earnings, resulting in a healthy rise of 12% in adjusted earnings per share. Reported revenue rose by 11%, with organic, constant currency group revenue growth coming to 7%. This second figure excludes the effects of takeovers, mergers, acquisitions, and currency fluctuations and is a more accurate reflection of the revenue generated from SAB’s primary business activities.
Dividends per share for the year grew by 12% to 91 US cents, while the group also managed to improve its free cash flow by 23% to US$ 3,048m. Free cash flow (FCF) is the result of operating cash flows exceeding capital expenditure, and a large amount of FCF will enable an expanding company such as SAB to partake in further M&A activities to the benefit of shareholders.
SAB reported lager volumes at the group level of 229 million hectolitres, which is a 3% increase from last year’s results. The volumes of soft drinks sold grew by 7% to 49 million hectolitres.
A Global Presence
The group currently operates in six regions worldwide and as of late has been actively trying to expand its market share in each region. The breakdown of EBITA (Earnings Before Interest, Taxes, and Amortization) between regions indicates that SAB has managed to achieve substantial organic growth in earnings in all regions excluding Europe and North America.
In Europe lager volumes fell by only 1%, but an increase in raw material costs saw EBITA drop by 9%. Considering the major financial turmoil in Europe, the insignificant decline in volumes emphasizes SAB’s value as a defensive company.
A strategic alliance with the Turkish brewer, Anadolu Efes, was concluded at the start of March 2012, and should have a positive impact on this region’s results in this financial year. SAB exchanged its Russian and Ukrainian beer businesses for a 24% equity stake in the Anadolu Efes group, which will provide exposure to markets in Turkey, Russia, Central Asia, and the Middle East.
Africa is proving to be an exceptional market, with EBITA increasing by 16% as a result of lager volumes growing by 13% and soft drink volumes by 11%. The Group attributes much of its profitability in Africa to the provision of raw materials by local agricultural programs. This includes brewing the world’s first ever cassava-based beer in Mozambique, sourcing advice and input materials from the local community and farmers. A strategic relationship forged with Castel enabled them to take over an existing Castel brewery in Onitsha, Nigeria, whilst production from a brand new brewery being built in Onitsha will start in September 2012. The company sees a lot of potential for further expansion into Nigeria and the rest of Africa, as the per capita beer consumption in Africa is still very low compared with more developed regions.
In Asia Pacific EBITA grew by 30% owing to good growth in both Indian and Chinese markets, with lager volumes increasing by 4% for the region. SAB acquired Foster’s of Australia in December 2011, which provided a foothold in a very stable and profitable Australian beer industry. An early setback occurred when some licensed brands, including Corona, left Foster’s after SAB took over management of the company.
The company’s shares currently trade on a PE ratio of 23 and a dividend yield of 2.2%, with the forward PE dropping slightly to 19.7. The share price has been a one-way bet since the end of the 2008 financial crisis, with an increase of about 26% in the last 12 months. The consensus view seems to be that the share is too expensive to buy at the moment, but that holders should hang on just a little bit longer to see exactly where SAB’s ambitious expansion plans will take them.
Cor van Deventer
021 9144 966
Source: MoneyWeb, www.sabmiller.com
Tue, 29 May 2012
South Africa's rand held steady against the dollar on Tuesday after getting a mild lift from better than expected economic growth data for the first quarter, while analysts say the local unit will stay below 8.45 for the short term.
South African stocks ended higher on Tuesday, notching up their second straight day of gains, with MTN Group among the top performers after the wireless phone group said it would continue to return cash to shareholders.
An earthquake killed at least 15 people in northern Italy on Tuesday, damaging buildings and spreading fear among thousands of residents living in tents after a similarly strong tremor in the same region flattened their homes nine days ago.
An attack on the offices of one of the two finalists in Egypt's presidential race has sounded a warning that the last round of voting might spark more violence in a nation polarised by the choice between an Islamist and an ex-general from Hosni Mubarak's era.
Western powers expelled Syria's envoys on Tuesday in outrage at a massacre of 108 people, almost half of them children, but a defiant President Bashar al-Assad, backed by Russia, showed no sign of yielding to their pressure.
World Markets (Spot Prices)
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Latest Consensus Changes**
|SLM||SANLAM LIMITED||HOLD||18 May|
|INL||INVESTEC LIMITED||BUY||18 May|
|HPA||HOSPITALITY PROP FUND A||BUY||18 May|
|VPF||VUNANI PROP INV FUND LTD||BUY||18 May|
|REB||REBOSIS PROPERTY FUND LTD||BUY||18 May||
|Expected||Company Name||Fin. Date|
|30 May 2012||BRIKOR||February 2012 (Final)|
|30 May 2012||IDECO||February 2012 (Interim)|
|30 May 2012||IDECOP||February 2012 (Interim)|
|30 May 2012||KEATON||March 2012 (Final)|
|30 May 2012||PLATFIELD||February 2012 (Final)|
|MTN||MTN Group Ltd.||29/05/2012||Confirmed|
|HWN||Howden Africa Holdings Ltd.||30/05/2012||Confirmed|
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