SABMiller finds raw material prices hard to swallow

SABMiller, the huge brewing company behind brands including Grolsch and Foster's, has joined the chorus of companies griping about rising raw material costs, as its margins felt the squeeze in the first half of its financial year.

The group has seen revenues grow 6% at constant currency prices in the six months to the end of September.

Earnings before interest tax and amortisation (EBITA) were also up 6% at constant currency prices, although EBITA margin reduced by 10 basis points (bps), or one-tenth of a percentage point, to 17.2% as raw material costs began to bite.

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SABMiller has interests globally and the growth areas remain outside of its traditional heartlands in the US and Europe: Latin America saw EBITA growth of 16%, Asia was up 29% (reflecting higher profits in China), Africa was up 23% and South Africa was up 8%.

Tellingly, however, North America saw EBITA fall 6% on lower volumes and higher costs, while Europe was also down 6%, affected by the horrendous uncertainty surrounding the euro.

Total revenues for the group were $15,688m, compared to $14,236m at the same point of 2010. Adjusted profit before tax grew from $2,267m to $2,457m. The broker Charles Stanley had forecast revenues at $15.4bn with pre-tax profits of $2,360m.

Earnings per share of 103.3 cents were a tad shy of the 103.9 cents expected by the market. The interim dividend has been hiked by 10% to 21.5 cents.

Commenting on the results, SABMiller's Chief Executive Graham Mackay said: "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."

He added however: "Market conditions have remained challenging in the USA and much of Europe and increases in input costs have continued, as expected."

BS