SABMiller, the world's second-largest brewer, reported a 10% rise in annual earnings on Thursday, at the top end of forecasts, but warned over rising commodity prices, especially aluminium beer cans.
The maker of Miller Lite, Peroni and Castle beers said it was hit by high-priced aluminium contracts in the big United States beer can market which only started to unwind last December and was unable to raise beer prices to compensate.
Chief Executive Graham Mackay said the group had been disadvantaged by its aluminium contracts, but expected the situation to improve in the U.S. where volumes of its key brand Miller Lite fell and cheaper beers suffered from price cutting.
"We don't see the situation in relation to aluminium prices getting any worse, in fact we expect to start to see the situation ameliorate," Mackay said in a conference call.
The London-based group, which ranks behind Belgium-based InBev in world brewing, posted adjusted earnings of 120 cents per share for the year to March 31 towards the top of analysts' forecast range of 110 to 124.8 cents per share.
The group also said the loss of its Amstel brewing licence in South Africa in March which will cost the group around $80 million in profits in the current year.
SABMiller's shares dipped 0.3% to 11.82 pounds in European trading. They have risen from a low of 10.39 pounds in mid-March when it lost the Amstel licence, but have underperformed the DJ European food and beverage index by 14% over the last year.
Led by Latin America
House broker Cazenove described the results as a good set of figures led by Latin America and Europe with only Miller disappointing, and raised its year to March 2008 earnings forecast by 4% to 132 cents from 127 cents previously.
The brewer saw strong growth in most of the world, but suffered a 17% profit fall at Miller due to the higher commodity costs, a decline in Miller Lite volumes and price cutting in the economy segment of the beer market led by U.S. industry leader Anheuser-Busch, the group said.
SABMiller makes over a third of its earnings in rand from beer and soft drinks, and the South African currency has fallen against the dollar by 13% over the last year, cutting its South African profit growth to 4% in dollar terms.
Its year dividend rose 14% to 50 cents a share.
SABMiller shares trade at 16.4 times March 2008 forecast earnings, reflecting the risks from its emerging market exposure compared to rivals InBev on 20.1 and Heineken's 20.5, according to Reuters Estimates, while Scottish and Newcastle on 16.9 times is buoyed by takeover talk.