By Andy Young
SABMiller has reported an 18 per cent drop in its financial year profit having been hit by costs related to the AB InBev takeover and foreign exchange volatility.
The brewer’s net profit fell to US$2.7 billion for the year ending March 2016, down from $3.3bn the previous year. The company logged a one-off $721 million charge, which was tied to costs relating to the AB InBev takeover as well as investments in Africa. Beverage volumes for the brewer actually rose over the year, up by two per cent in total, with beer volumes up one per cent and soft drinks up six per cent.
Alan Clark, SABMiller’s CEO said: “These are good results. We grew EBITA across all regions and our group EBITA margin improved through the year, on an underlying basis. This performance reflects our focus on driving superior growth by strengthening our core brands, expanding the beer category to reach more consumers on more occasions and placing an emphasis on premiumisation in all regions. As noted through the year, the strengthening dollar against our operating currencies had a material negative impact on reported results."
He added: "Premium lager brands’ NPR grew by 11 per cent, while global lager brands’ NPR grew by 13 per cent, with growth across all regions. Our growth accelerated in the year, driven by improving momentum in Latin America, continued strong and well-balanced momentum in Africa and improvements in Australia and Europe in the second half."
In its result statement the company highlighted its Australian performance, saying: “In Australia, group NPR growth of 4 per cent on a constant currency basis was driven by NPR per hl growth of 3 per cent with price increases complemented by premiumisation as a result of the shift into premium and contemporary brands. Volumes were marginally up on the prior year, with improved momentum in the second half, up 3 per cent.
“This performance was underpinned by improved customer relationships, excellent execution as well as product innovation. As a result, we outperformed our key competitors in a market where the rate of decline has been more muted. During the year we focused on rebalancing the portfolio, leveraging the consumer switch from classic to contemporary and premium segments. Premium lager segment volume growth of 16 per cent was led by strong momentum in Great Northern in our contemporary portfolio, together with the sustained double digit growth of the Peroni and Yak brand families.
“The successful relaunch of our premium brand Pure Blonde in June 2015 supported our expansion of the category. Our classic mainstream brands Victoria Bitter and Carlton Draught continued to decline, in line with segment trends, although this was partially mitigated by the strong performance of Carlton Dry.
“EBITA growth and EBITA margin expansion, on a constant currency basis, reflected the topline performance coupled with our continued cost control discipline. The focus on cost optimisation throughout the year included improving production and logistic efficiencies as well as the streamlining of back office processes.”
Speaking about the results, Anna Ward, Research Analyst, Alcoholic Drinks with Euromonitor International, said: "SABMiller has reported a decline in its full-year profits, yet 'these are good results' according to chief executive Alan Clark. And indeed from a long-term perspective, that appears to be true.
"The decline in profits highlights the volatility of emerging markets; although a temporary setback, investment impairment in Angola and South Sudan had a clear negative impact. Nevertheless, the company achieved 6 per cent volume growth in Africa and 5 per cent in Latin America, the two regions with the highest forecast 2015-20 CAGR (4 per cent and 3 per cent respectively, according to Euromonitor International data). SABMiller’s prominence in these high-growth regions has always been the main driver of AB-InBev’s interest in the company, the logic behind which is emphasised by this latest announcement.
"AB-InBev is in the process of divesting all of SABMiller’s European assets, so the stagnant volumes reported in this region will not concern them. In its pursuit of dynamic growth markets, Europe holds little appeal."