SABMiller sets new savings goal as trading stays tough

Reuters
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Bottles of beer move along a production line at the South African Brewery in Alrode April 2, 2009. REUTERS/Siphiwe …

By Martinne Geller

LONDON (Reuters) - Global brewer SABMiller announced a new cost-savings target on Thursday to help cushion it against difficult trading in a range of markets, sending its shares higher as investors anticipated a consequent boost to earnings.

The maker of Miller Lite and Peroni beers is struggling to grow in Europe and North America - like many consumer goods companies - and new revenues from an emerging middle-class in developing markets have been dented by weak currencies in many of those countries of late.

On Thursday, it announced full-year earnings up 1 percent at $6.45 billion, narrowly passing analysts forecasts, and net revenue down 1 percent to $26.72 billion, narrowly missing forecasts. The weakening of the South African rand and Turkish lira, among other currencies, shaved about $400 million from operating earnings.

In response, SABMiller said it would aim to hit $500 million a year in savings by the fiscal year ending in 2018 "to deliver efficiencies to invest ... and improve our margins."

The new programme builds on an earlier one whereby SABMiller standardized its computer and procurement systems and aims to make back-office processes more efficient as well as double the amount of raw material purchasing handled by its central procurement system to allow for more efficient buying.

Bernstein Research analyst Trevor Stirling estimated that if half the company's savings were invested and half flowed through to the bottom line, there could be a 3.9 percent boost to annual earnings before interest, tax, depreciation and amortization (EBITDA).

By 1115 GMT its shares were up 3.3 percent, versus a flat FTSE 100 index. The shares had fallen to a 52-week low in January on fears about slowing growth in emerging markets, but those fears have since eased and through Wednesday, the shares were up 23 percent since then.

SABMiller recently posted full-year sales volume growth of 2 percent, with lager volume up only 1 percent, hurt by volatility in African markets including Zimbabwe, Mozambique and Zambia. [ID:nL6N0N716M]

On Thursday it said trading in the new year fiscal year, which began in April, should be broadly unchanged, with growth driven by developing markets which would however continue to be affected by currency movements.

SABMiller said it expects to continue to raise prices on some products as raw material costs are expected to rise at a low single-digit rate.

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