The weakness against the US dollar of the currencies of many countries in which SABMiller operates limited growth.
"At last year's exchange rates we would have been reporting revenue up 17,9% and earnings before interest, taxes and amortisation (Ebita) up 23,8%," says SABMiller executive chairman Graham Mackay
Currency weakness against the dollar limited revenue growth to 11% to US$17,5bn - US$1bn less than at constant currencies - and Ebita growth to 17% (US$472m) to US$3,17bn, US$170m below its constant currency potential. One of the biggest negative effects was from the rand's weakening. It cut SA Breweries' contribution from a constant currency US$495m, a rise of 11%, to US$426m - a fall of 4%.
On balance, SABMiller investors in South Africa benefited, with EPS in rand terms up 32%. SABMiller's share price in rands is up 40% since the start of 2012 compared with a 29% rise in dollar terms.
On prospects for the second half of the financial year Mackay's cautious tone indicates a slower growth rate. Particularly important will be a smaller boost from Foster's, Australia's largest brewer, acquired in December 2011 for US$10,2bn. Foster's "contributed significantly" to first-half growth, says Mackay.
Indicative of Foster's contribution, Asian Ebita rose US$368m (265%) compared with the first half of 2011/2012 to US$506m, while organic Ebita growth on a constant currency base was 10%, a rise of about US$14m.
In the second half of the year the boost from Foster's will be off the previous financial year's base, in which it was included for three months.
Mackay also points to a "slowing of growth in emerging markets towards the end of the second half, notably in Latin America and China".
Following a strong rise in SABMiller's share price over the past year, UK-based Sanford C Bernstein analyst Trevor Stirling believes it is now close to fair value. His target for the share's price 12 months hence is £28,50 or R406. The share is trading at R402.
Stirling forecasts SABMiller's EPS growth to average 14% a year over the next five years in sterling terms. Among the growth drivers, he says, will be the brewer's diversified exposure to high-growth emerging markets.
"We are the most diversified beer company and have the highest exposure to emerging markets," says Mackay. "Our superior emerging-market position will continue to pay dividends."
Sterling also sees SABMiller's business capability programme delivering ongoing cost and efficiency benefits. In the last six months the programme yielded US$115m in cost savings.
"Our aim is to raise profitability sustainably," says Mackay. "SAB is a prime example: it has cut costs by R1,6bn over the past three financial years," he says.
SAB also demonstrated the group's marketing ability in its battle with Brandhouse, which began in 2007 when Heineken, a Brandhouse shareholder, terminated SAB's licence to brew Amstel. Amstel was then South Africa's top premium beer and had a 9% market share.
With Castle Lite as its premium-brand weapon, SAB has decisively won the battle. "Castle Lite volumes are 22,5% up on a year ago," says SAB chairman and managing director Norman Adami. Castle Lite's market share, he says, is now bigger than all Brandhouse beer brands combined, while SAB's total market share stands at just under 90%.
Source: Financial Mail via I-Net Bridge
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