Results preview: SABMiller – strong dollar will hurt profit

By Shaun Murison*

The home brewed, dual listed (LSE & JSE), beverage producer and distributor is set to release full year results on Wednesday the 13th May 2015.

Full year guidance via a trading update from the company has revealed that the Group’s net producer revenue (NPR) is expected to have grown 4% over the 12months being reported, while the total beverage volume grew a marginal 1% over the period. Lager volumes look to have been flat over the period while soft drink volumes for the year were up 8%.

SABMiller Plc boasts major operations in South (Latin) America, Africa, Asia (Pacific), Europe and North America. Growth in beverage volumes in Africa and Latin America have been eroded by weakness in China and North America while European volumes have remained more or less flat. As the group reports earnings in U.S. dollars, a strong performance by the greenback, will have further weighed on the company’s earnings.

In the first half of the year SABMiller offloaded its interest in Tsogo Sun in the interim period for an amount of $971m.

While SABMiller Plc holds an impressive global portfolio, the prevalent market theme of slowing economic growth is evident in the aforementioned group volumes and in turn NPR. Trading on a Price to Earnings (P/E) ratio of nearly 30x and a forward P/E multiple of around 24x, the suggestion might be that the current share price is trading at a significant premium relative to the realized growth achieved, especially considering the uncertain global market outlook at present. A poll of analysts surveyed, by Thompsons Reuters suggests an average rating of hold on the stock.

* Shaun Murison is an analyst at IG Markets

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