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Weakening exchange rates contribute to 26% half year profits decline for SAB

sabmiller1More than a quarter of SABMiller’s pre-tax profits were wiped off the brewer’s balance sheet by weakening exchange rates in the first half of the year.

The firm made almost $1.5 billion in the six months ended September 30th, down 26% from $2.02 billion in the same period last year.

Despite the slide SABMiller said underlying performance had been strong, with firm pricing, cost control and market share gains driving a 10% rise in adjusted earnings to $1.24 billion.

“In some of the toughest economic conditions seen for decades, we’ve continued to take share in a number of markets,” said SABMiller CEO Graham Mackay (pictured).

“The weakness of our major operating currencies against the US dollar has affected reported results, but we’ve continued to generate strong underlying performance.”

Lager volumes dipped 1% during the period, with growth of 3% in Africa and 9% in Asia being offset by more challenging conditions in other markets. Volumes declined 6% in Europe, 5% in North America and 1% in Latin America.

The firm said group revenue increased 3%, driven primarily by price increases undertaken in the second half of 2008. SABMilller also said its margins grew by 110 bps during the period.

North American joint venture MillerCoors turned in earnings growth of 7% despite the fall in volume. Latin American earnings grew 19%, driven by strong pricing, despite the effect of economic and social unrest on volumes in some countries.

In Africa, volume growth was led by strong performances in Uganda, Zambiaand Mozambique. In the firm’s South African heartland volumes declined 3% and earnings remained flat due to adverse exchange rates.

The engine of growth in Asia, where earnings climbed 24%, was China, where joint venture CR Snow outpaced market growth of 6% by increasing its volumes by 15%.

Despite the slide in European volumes, SABMiller said revenue per hectolitre was increased by 6% with market share in the UK, Romania and Poland being driven by its key brands.

Miller Brands, SABMiller’s British import arm, expanded its share of the premium lager market by 16% to 6%. Peroni delivered growth of 35% and Pilsner Urquell 26% in a lager market the slid 7% during the period.

Miller Brands’ MD Nick Miller said the success has inspired the firm to plan the launch of another, as-yet unnamed brand in the UK. He said: “We haven’t reached a decision yet on what the brand will be, but we have an incredibly exciting and extensive range to choose from.”

Worldwide SABMiller owns more than 200 brands and lists 21 of these as ‘flagships’. For the second half of the year the multinational said conditions will continue to be challenging, but performance will continue to be driven by “the unique strength of our local brand portfolios”.

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Monday, January 22, 6:10 pm

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