UK: SABMiller shares slip on sales concerns in key market

SABMiller slipped from a record high on May, 9 on concerns that investor appetite for defensives had overshadowed slowing beer sales in its key markets, Financial Times reported.

The shares fell following weak results overnight from Efes, the Turkish brewer that bought SAB’s Russian business in 2011. Efes said destocking and a price war meant its Russian operations barely broke even in the first quarter, with sales dropping 23 per cent year-on-year.

Efes was not individually significant to SAB, as its 24 per cent stake provided about 3 per cent of group earnings, said Canaccord Genuity. But, with SAB’s MillerCoors joint venture and its key rival AB InBev also reporting disappointingly poor sales in recent weeks, the risk was on the downside, said the broker. It downgraded SAB to “sell” ahead of the brewer’s full-year results due on May 23.

“Disappointing margins and momentum in the US, weakening performance in Latin America in the wake of price increases, and difficult trading conditions in South Africa persuade us that now is the time to take profit,” said Canaccord. It added that AB InBev was probably too focused on integrating its Modelo acquisition in the short term to consider a bid for SAB.

SAB closed down 2 per cent at £35.81. A 44 per cent gain over the past year put the stock on 18.5 times 2014 earnings, which could only be justified on 35 years of cashflow returns, Canaccord said.

10 May, 2013