- Title: SABMILLER-RESULTS SAB strength could brew takeover trouble
- Date: 6th October 2015
- Summary: LONDON, ENGLAND, UK (OCTOBER 6, 2015) (REUTERS) (SOUNDBITE) (English) NAB MARKET ANALYST, NICK PARSONS, SAYING: "I can certainly see the impact of emerging currencies, and indeed, the strong dollar has been an influence on companies. I think what we will see is it being very much used as an alibi. We'll see it being used as an excuse for any disappointing third quarter res
- Embargoed: 21st October 2015 13:00
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- Topics: General
- Reuters ID: LVA7EEF2KRHF6YV0IBJ8808NFG5U
- Aspect Ratio: 16:9
- Story Text: SABMiller, the brewing giant in talks about a potential takeover by rival Anheuser-Busch InBev, reported improved underlying quarterly sales on Tuesday which it said reflected the strength of its long-term business model.
The earlier than expected statement from the maker of beers including Peroni and Grolsch was seen by some analysts as aimed at trying to ensure a higher bid price from AB InBev, maker of Budweiser and Stella Artois.
SAB said it had brought forward its trading update to ensure the timely release of information during what is classed as an offer period.
A U.S. newspaper reported late on Monday that SAB's management was leaning towards trying to fight off a takeover. The company declined to comment on the New York Post report.
SAB said group revenue, excluding currency effects, rose 6 percent in its second quarter, which ended on Sept 30, while volumes rose 2 percent. That marked an improvement from the first quarter, when revenue rose 3 percent and volume was flat.
Growth was driven by demand in its Latin American and African markets, which are seen as being among the most attractive to AB InBev. Strength in those markets offset declines for SAB in Asia Pacific and North America.
The update had been scheduled for Oct. 15, the day after the deadline for AB InBev to make a firm offer for SAB, following disclosure on Sept. 16 of an initial approach.
Mike Ingram, Market Analyst at BGC Partners, said that the fact that the results were reported early was a function of the deal itself.
"Originally this trading statement was due out on the 15th of October which is a day after AB Inbev has to either put up or shut up, and under the takeover code, if SAB has that kind of material information during a bid, it has to disclose it," he said.
"But clearly the way they're pitching these numbers is that "our company is doing reasonably well" and certainly if you look at the organic constant currency revenue it's up by around six percent, although i think shipments somewhat disappointed and that's perhaps why you're seeing the stock marked down a little bit this morning, and very clear signs I think from the management of SAB Miller management that they aren't necessarily going to roll over and play dead," he added.
"Clear signs that they aren't necessarily going to agree to a merger with AB Inbev, and, indeed as AB Inbev has already indicated, it's probably not prepared to launch a hostile takeover. So yes, there's a regulatory necessity, I think, for this statement from SAB Miller today, but having said that it's a pretty good marketing pitch for the incumbent management too," he told Reuters.
The positive picture was clouded by the weakness of a range of currencies against the U.S. dollar, such as the South African rand. Reported group revenue, taking into account currency effects, fell 9 percent in both the first half and second quarter.
Chief Executive Alan Clark said in a statement that, while adverse currency movements have materially impacted the company's reported results, they have a strong business with exceptional long-term prospects.
NAB's Nick Parsons said that many companies can and have cited emerging market currency value fluctuations as a problem for their bottom line, but while dollar strength was certainly something to consider in performances, it didn't paint the whole picture.
"I think what we will see is it being very much used as an alibi," he told Reuters.
"We'll see it being used as an excuse for any disappointing third quarter results, and we're into that season now, we're just getting into it in the United States and elsewhere, and whether or not volatilty in EM or a lack of demand in EM, or the strength of the dollar has contributed to bottom line, it certainly is a very, very convenient excuse for a CEO who's got to face the media, who's got to face a shareholders meeting and is looking to defend the performance of his or her company over the course of the last 13 weeks," he said.
"So I think we'll hear a lot about emerging markets, we'll hear a lot about the strength of the dollar. Whether or not that is really responsible is for those CEOs and their consciences. But I think we'll hear far much more about it than is actually warranted, because it's a very, very convenient excuse. It absolves corporate responsibility and it externalises the blame, and it very simply says "it's someone else's fault; it's nothing to do with me"," he added.
A takeover of SABMiller, the world's second largest brewer, could cost upwards of 68 billion pounds ($103 billion), according to analysts' estimates.
Despite the strong performance, SABMiller's shares were down 1 percent at 3725 pence at 0400 EDT, underperforming the FTSE 100 index .FTSE, which was up slightly.
Through Monday's close, SAB shares are up 25 percent since AB InBev's takeover approach was revealed. Some of that premium might be coming out of the stock, analysts said, on speculation the deal might not go through, given the latest media report.
SAB Chairman Jan du Plessis last year successfully defended miner Rio Tinto, where he is also chairman, against a takeover bid from Glencore.
Still, SAB is seen as having somewhat limited strategic defense options. It tried to buy Heineken last year but was publicly spurned. Other possible combinations mooted by analysts include Diageo, Carlsberg or Coca-Cola, though the likelihood of any of them coming to fruition is unclear. - Copyright Holder: REUTERS
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