JSE-listed SABMiller expects the depreciation of key operating currencies against the US dollar to continue to have a negative impact in the current financial year, having materially affected its interim, unaudited results for the six months to September 30.
However, CEO Alan Clark noted on Thursday that the multinational brewing and beverage company had a good first half, stripping out the effects of adverse exchange rates, with strong growth in Africa and Latin America and a better mix across all of its regions.
“On an organic, constant currency basis, group earnings and margins improved as a result of growing volumes and net producer revenue (NPR) for every hectolitre and continued cost savings.”
SABMiller group net NPR grew 4%, beverage volumes 1% and group NPR for every hectolitre 4%. Growth accelerated in the second quarter, with group NPR growth of 6% and beverage volume growth of 2%.
The company further highlighted an increase in earnings before interest, taxes and amortisation (Ebita) of 5% and Ebita margin expansion of 20 basis points. Adjusted constant currency earnings per share (EPS) climbed by 5% and by 7%, excluding the prior year net earnings impact of the group's disposed investment in Tsogo Sun Holdings.
Reported group NPR, Ebita and adjusted EPS declined by 12%, 11% and 11%, respectively, primarily on the impact of the US dollar.
Free cash flow of $1.423-million, despite adverse currency movements, was also reported for the period under review, with improved cash conversion.
In terms of cost savings, the company intended to deliver more than $430-million of yearly savings by March 31, 2016, against its original target of $500-million a year by March 31, 2018. Further savings of at least $550-million were expected by 2020, bringing the aggregate yearly run rate for the programme to at least $1.050-million.
SABMiller forecast growth to continue to be principally driven by its developing markets and through its focus on premiumisation across all markets.
"In our African and Latin American markets, our affordability strategies are helping us grow beer's share of total alcohol [consumption]. At the other end of the price ladder, our volume growth in premium lagers included particularly strong growth of our global premium brands," commented Clark.
Meanwhile, raw material input costs were expected to increase by low single digits in constant currency terms with some markets continuing to be impacted by foreign exchange movements on imported raw materials.