Demand for higher-priced beers helped SABMiller (SAB.L) to report a pick-up in quarterly underlying sales despite currency headwinds, a day after it formally received a $100-billion-plus takeover bid from industry leader Anheuser-Busch InBev (ABI.BR).
The maker of beers such as Peroni and Grolsch said on Thursday its performance accelerated in the second quarter, with underlying revenue rising 6 percent and beverage volume up 2 percent from the prior year.
Fueled by strong gains in Africa and Latin America, and success in selling more higher-priced drinks including Castle Lite in South Africa and Cusquena in Peru, the results are an improvement from a 3 percent rise in revenue and flat volumes in the first quarter.
Yet SABMiller is being hammered by the weakness of various operating currencies including the Colombian peso, Australian dollar and South African rand, which make raw materials like barley and aluminum more expensive for local units, and then reduces the value of those units’ revenues.
“It’s a good business, but it’s under an awful lot of pressure,” Bernstein Research analyst Trevor Stirling said, adding that currencies were a major reason for a decline in the share price earlier this year.
Its shares had fallen 18 percent in the four months to mid-September, when SABMiller revealed AB InBev’s approach. Many analysts say that decline had prompted AB InBev to finally launch a takeover offer that had been speculated about for years.
On a reported basis, including the currency impact, revenue fell 12 percent to $10.0 billion and earnings before interest, tax and amortization (EBITA) fell 11 percent to $2.9 billion in the six months to Sept. 30.
SABMiller said growth would continue to be driven by developing markets and its focus on more premium drinks, though foreign exchange and higher raw material costs would still weigh on results.
It said it planned to deliver more than $430 million in annual savings by the end of its fiscal year, on 31 March 2016. That is ahead of its original target, for savings of $500 million by 2018.
“The SABMiller board does believe that our strategy would have delivered further value to our shareholders over the long term. However, AB InBev’s offer secures that value today, which is why the board unanimously recommended it,” SABMiller Chief Executive Alan Clark said on a conference call.
The takeover of the company, one of the largest in corporate history, is not expected to close until the second half of 2016, due to various antitrust approvals needed.
In the meantime, SABMiller said it was committed to keeping employees motivated, despite what Clark described as a general tone of uncertainty among staff around future job security.
He said the combination of its African soft drink bottling assets with those of Coca-Cola (KO.N), a deal announced nearly a year ago, was on track to complete in coming months. He declined to say what would happen to the business after the takeover by AB InBev, which serves as a bottler for PepsiCo (PEP.N).
He also told reporters it was too early to talk about SABMiller’s stakes in France’s Castel Group and Turkey’s Anadolu Efes (AEFES.IS) or his own career intentions following the takeover.
REUTERS
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