UPDATE 2-SABMiller sees margin growth after Latam, Africa surges

Thu May 23, 2013 6:21am EDT

* Sees margin improvement of 20-50 basis points this year

* EPS 238.7 U.S. cents vs 239 Thomson Reuters forecast

* EBITA in line with mean, below SmartEstimate

* Main growth in Latin America, Africa

* Shares down 1.7 pct, but outperformed this year

By Philip Blenkinsop

BRUSSELS, May 23 (Reuters) - SABMiller, the world's second-biggest brewer, forecast margin expansion in the year ahead after profit grew in line with expectations thanks to a surge in earnings in Latin America and Africa.

The maker of Grolsch, Peroni and Pilsner Urquell, said on Thursday it expected trading conditions to be broadly unchanged in the next 12 months, with strong growth in developing markets and difficulties in Europe and the United States.

The brewer said it would increase prices in places, with input costs expected to rise by a low to mid-single digit percentage from a mid single-digit rise in 2012/2013.

"We would assume that our margins would grow next year by a modest amount, somewhere between 20 and 50 basis points, so similar to the current year," Chief Financial Officer Jamie Wilson told a conference call.

Operating margin grew by 40 basis points on a constant currency basis in the financial year to the end of March.

SABMiller shares were down 1.7 percent at 1007 GMT, compared with the 1.1 percent decline of the STOXX European food and beverage index. However, the brewer's shares have outperformed its rivals in the year to date, gaining 23 percent, against 11 percent for the index.

Analysts said SABMiller's earnings were slightly lower than expected at the operating level, with more or less in line earnings per share and a reasonable outlook.

"Directionally it's better than the others largely due to geographical mix. They aren't in Brazil and have minimal exposure to Western Europe," said Bernstein Research analyst Trevor Stirling.

Anheuser-Busch InBev has cut its sales forecast for Brazil and Heineken its view for overall group growth after weak starts to the year, while rival Carlsberg benefited from its push into Asia.

Stirling said that with a price to forward earnings ratio of 21 times, SABMiller was trading at a premium of 20 percent to peers so many of its positives were already priced in.

SABMiller, which now earns 75 percent of its profit from emerging markets, said adjusted earnings per share rose 11 percent to 238.7 U.S. cents, matching the Thomson Reuters I/B/E/S average forecast of 239 cents.

The London- and Johannesburg-listed company said EBITA (earnings before interest, tax and amortisation) rose 14 percent to $6.42 billion, in line with the Thomson Reuters mean forecast but below the $6.54 billion StarMine SmartEstimate, which weights analyst forecasts according to previous track record.

The brewer, which has expanded rapidly since the 2002 takeover of Miller by SAB, whose origins were in South Africa, said EBITA (earnings before interest, tax and amortisation) in Latin America grew 11 percent on a like-for-like basis.

The continent now makes up about a third of SABMiller's earnings, with leading positions in Colombia, Ecuador and Peru, although volume growth slowed in the January-March period, with a decline in Colombia, partly due to price increases.

In Africa, EBITA grew by 20 percent and overtook both North America and Europe through brands such as Nile and Castle, which dominate the east of the continent from Uganda to South Africa.

Asia-Pacific earnings also improved, as it made gains in China and India and achieved half the targeted $180 million cost savings from its end-2011 acquisition of Australia's Foster's.

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