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SAB surpasses Diageo for first time as UK’s largest Drinks Company

SABMiller surpassed Diageo as the largest UK drinks company by market value for the first time yesterday, as its share price rose 3.4 per cent to £17.14.

Shares in the brewer of Miller and Grolsch soared after it announced that its first-half profits rose 6 per cent to $1.92 billion (£1.15 billion) yesterday. It also announced a cost-cutting programme that it hopes will save $300 million a year by 2014.

Falling revenues were boosted by cost savings and price rises in the beer SAB brews. The volume of lager sold was down 1 per cent.

UK consumers drank 36 per cent more — or 23 million extra bottles — of Peroni Nastro Azzurro over the six months as the exposure of the Italian beer brand grew.

The company has been suffering from high prices for barley, aluminium and glass, which it agreed to pay when these commodities were more expensive, but these should start to unwind in its second half. Revenues have also been dented by the strength of the dollar against key currencies for SAB, such as the South African rand.

The better-than-expected results helped the company’s market value to reach £28.3 billion, while Diageo’s market value sank to £25.5 billion.

A rumoured bid for FEMSA, the Mexican brewer of Sol and Tecate beers, would increase the company’s size. It is already focused on developing countries, with nearly 90 per cent of its profits coming from emerging markets.

Graham Mackay, the chief executive of SAB, declined to comment on FEMSA yesterday, but added that the company was looking for acquisitions which gave “value growth opportunities”.

Mr Mackay added: “Trading conditions will not change much in the second half, with only perhaps a slightly firmer undertone.”

Matthew Webb, analyst at Cazenove, said: “An outstanding set of first-half results from SABMiller, 17 per cent ahead of our forecast at the EPS level. We expect the shares to go higher despite their recent strong run.”

Falling beer volumes have also been experienced by Anheuser-Busch InBev, Heineken and Carlsberg recently.

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Friday, July 21, 10:40 pm

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