Currency slides hit SABMiller

SABMILLER’s half-year production update released yesterday shows the effect severe currency weakness in the group’s key operating markets had on its profit margins.

SABMILLER’s half-year production update released yesterday showed the adverse effects severe currency weakness in the global brewer’s key operating markets were having on group profit margins.

Stripping out currency effects, the world’s secondlargest brewing company said net producer revenue rose 4% in the six months ended September as increased lager sales in its growing African and Latin American markets more than offset lower volumes in North America and the Asia Pacific.

SABMiller’s brands in Africa and Latin America include Castle, Hansa, Flying Fish, Millers, Aguila Light, Club Colombia and Millers.

When measured in dollars, SABMiller’s reporting currency, net producer interim revenue fell 9%, reflecting the effect adverse currency movements had on the group’s results

Emerging market currencies have this year tumbled to multiyear lows against the dollar, mainly on concerns about the implications a puncture in China’s economic expansion rate would have on the global economy. Compounding the currency slides has been the collapse of commodity prices from oil to coal which countries like SA, Australia, Russia and Nigeria depend on for export revenue.

“The continued depreciation of our key operating currencies against the US dollar has continued to have an adverse translational impact on (the) reported performance,” SABMiller said.

Of the 24 currencies in the emerging market basket, Russia’s rouble has weakened the most this year, falling more than 46% since January. The rand is the 18th worst performer, with losses of 17% since January, according to Bloomberg data.

Commenting on the production update, Momentum Asset Management portfolio manager Wayne McCurrie said: “These are not good results for a dollar, pound or euro investor.”

He said the update, released about a month sooner than expected, would have warranted a bigger fall in the share price yesterday had it not been for the potential take-over by AnheuserBusch InBev — the world’s biggest brewing firm. The stock lost 3.34% to close at R751.98.

SABMiller reported total volume growth of 1%. Soft drinks volumes rose 4% during the halfyear period.