Sure Kamhunga
15 October 2008
Johannesburg — BREWING giant SABMiller said yesterday beer volumes in SA, one of its main global markets, were down 1% in the six months to September, but sales had picked up in the second quarter despite softening consumer demand.
SABMiller has more than 75% of SA's premium beer market, though it has to deal with aggressive competition from brewers such as Heineken.
Cash-strapped consumers were feeling the knock-on effect of high food prices and, as a result, discretionary expenditure on nonbasic items had been affected, said retail analysts.
In an update, SABMiller warned the future looked less rosy, mainly as a result of worsening global economic conditions, weakening demand and fluctuating currencies, which it said would render the remainder of its financial year "increasingly uncertain".
Locally, retailers are expecting depressed sales in the coming months as debt-laden consumers tighten further spending patterns.
Liberty Group chief financial officer Russell Harte said yesterday at a presentation in Cape Town that debt service costs as a percentage of disposable income were estimated to have risen to 12,5% compared with 10% last year, while household debt as a percentage of disposable income would fall slightly to 75% from 76,5% last year.
Locally and elsewhere, SABMiller, the world's largest brewer by volume, was facing higher input costs for barley, aluminium and glass and slowing consumption in its key markets, though analysts said the group was focused on profitability rather than the pursuit of sales and market share.
Its two main markets, SA and Colombia, which produce about 40% of group profits, were both hit by high inflation and interest rates in the trading period under review.
"In our Africa and Asia business, organic lager volumes increased 2%. In Africa, lager volumes grew 11% on an organic basis following good growth in the prior year (8%), with strong growth across the region .
"In SA, our lager volumes were 1% below the prior year with sales stronger in the second quarter. Soft drinks volumes grew 2%," the group said.
"The market overall continued to be affected by softer consumer demand. As previously reported, ongoing cost inflation and currency weakness have impacted financial performance."
The company said globally, lager volumes grew 3%, while group revenue growth had benefited from firm pricing.
Revenue per hectolitre at constant exchange rates grew more than 5%, which had helped to offset the effect of soaring input costs.
In Europe, the group experienced a 2% growth in lager sales on an organic basis following on equally strong growth in the prior year of 12%, while markets in Poland and Romania also experienced impressive growth.
The group said volumes in the Czech Republic had declined 5%, but the trend had since been reversed as the market responded to trade and marketing initiatives to boost sales.
"Financial performance for the six months was in line with the group's expectations, benefiting from generally favourable exchange rates when compared with the prior year, whilst on an underlying basis, slower volumes have constrained profit growth," SABMiller said.
Scanning ahead, the group was less enthusiastic about its prospects, saying performance in the remaining six months would be uncertain because of deteriorating global economic conditions and weakening consumer demand .
With Reuters
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