SABMiller to build capacity in Africa

BY BUSINESS REPORTER

FOLLOWING strong growth in Africa and Latin America, SABMiller will invest more than $500m to build capacity in these subsidiaries, it has said after releasing its results for the six months ended September.

The world’s second-largest brewer by volume said it would spend $260m to fund capacity expansion in its subsidiaries in Uganda, Ghana, Zambia and Tanzania, and it would invest $295m in Peruvian subsidiary Backus.

SABMiller Africa’s impressive growth trajectory continued in the first half of the year, with volumes up 15%. Earnings before interest tax and amortisation in Latin America grew 16%, reflecting good volume growth, positive mix and fixed cost efficiencies.

CEO Graham Mackay said it was an emerging markets story, with Latin America and Africa performing well, and Europe and the US lagging.

"Top- and bottom-line growth has been strong in most of our developing market businesses, propelled by our continued investment in brands, sales and marketing capability and production capacity.

"Market conditions have remained challenging in the US and much of Europe, and increases in input costs have continued, as expected. We have taken further steps to extend our global portfolio. Our planned alliance with Anadolu Efes and recommended proposal to acquire Foster’s are both strategically important moves into attractive markets. We are making substantial investments in Africa, some of them greenfield," Mr Mackay said. The London-based brewer, with interests and distribution agreements in six continents, said beverage volumes were 3% ahead of the prior year on an organic basis, with lager volumes up 3% and soft drinks volumes up 6%.

"This volume growth, some mix benefits and selective pricing drove group revenue up 10% - or 6% on an organic, constant currency basis with revenue per hectolitre up 3% on the same basis."

Absa Asset Management analyst Chris Gilmour said it came as no surprise that Latin America and Africa were the star performers. "Africa continues to deliver, even off the high base, it is the unsung hero … South America has bounced back beautifully."

SABMiller said it hoped to complete the R93bn Fosters transaction on December 16, following regulatory approvals .

"Economic and market environments in the US and Europe are expected to remain difficult," SABMiller said.