THINKING LOCAL: SAB managing director Norman Adami says the South African beer market should grow Picture: MARIANNE SCHWANKHART

'Beer might be recession-resistant, it's not recession-proof'

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It expects, however, to benefit from favourable currency movements and lower cost pressures.

Net profit dropped from $1.423-billion to $973-million for the six months to the end of September, hit by weaker currencies in emerging markets, which reduced the value of sales and drove up input costs.

The brewer also faced weaker beer markets in many of the countries in which it operates.

Sales dropped 21% from $11.17-billion to $8.85-billion, but earnings beat analysts' estimates.

The 1% decline in beer volumes was less than that of many of its competitors because of SABMiller operations in China and other emerging markets, which fared better than the markets of more developed countries. The brewer earns about 90% of its profits in emerging markets.

The group announced a four-year cost-reduction programme to save $300-million a year by 2014. It intends to globalise its IT systems to reduce costs.

SABMiller's chief executive, Graham Mackay, said market share was not built at the expense of unit profitability.

Beer volumes in South Africa were down 3% and market share fell year-on-year. Mainstream brands performed better than premium brands, supported by strong growth in Castle Lager and Hansa Pilsener sales.

Margins in South Africa fell slightly. Efficiencies and cost savings have helped SAB increase market-facing investment by about R700-million.

Absa Investments analyst Chris Gilmour said SAB was definitely taking strain: "Beer might be recession-resistant, it's not recession-proof."

Heineken has built a brewery in South Africa to supply Amstel to the premium market, increasing local competition.

SAB managing director Norman Adami said the South African beer market had the potential to allow the group and other beer players to grow.

Earnings before interest and tax were up 19% in Latin America, but beer volumes were down 1%. Beer volumes declined 6% in Europe on an organic basis and North America delivered earnings growth of 7% despite lager volumes 5% below those reported last year.

Strong cost benefits continue to be realised from the MillerCoors joint venture.

Beer volumes were up 3% in Africa on an organic basis, with Uganda, Zambia and Mozambique reporting good growth.

Asian beer volumes were up 9% on an organic basis.

In China, beer volumes were up 15% in a market that grew by 6%.