UK: SABMiller issued its trading update for the group’s third quarter

Following the summer peak season in its southern hemisphere operations, SABMiller plc issued its trading update for the group’s third quarter and for the nine months ended 31 December 2006, according to company’s press room, January 17. The calculation of the group’s organic growth rates includes volumes for Bavaria SA from 12 October 2006, 12 months after it became part of the group.

The group’s organic lager volume growth for the third quarter was some 10%, marginally ahead of growth for the year to date of 9.5%.

South Africa Beverages achieved an increase in lager volumes of almost 1% during the quarter, in line with year to date volume growth. Lager volumes were constrained by stock shortages resulting from temporary disruptions to both raw material and glass supplies, in addition to disruptions in the national rail transport network. Underlying economic performance and consumer confidence in South Africa remain positive, contributing to continuing mix improvements, albeit at a moderating pace. Soft drinks volumes declined by 3% in the quarter reflecting the national shortage of carbon dioxide, and year to date soft drink volumes are now slightly down on the prior year.

On a pro forma basis, South America lager volumes for the three months to 31 December 2006 were some 12% above the prior year and up 11% year to date. This performance reflects continuing growth across the region with robust growth in Peru, where market conditions remain competitive. In Colombia, the launch of Peroni Nastro Azzurro and the relaunch of Club Colombia have been successful and the regional volume performance also reflects a range of initiatives including the packaging changes to Cristal in Peru. In Central America, carbonated soft drink volumes (CSDs) were up 6% for the quarter and year to date, with growth being achieved in both countries, whilst lager volumes were 9% higher in the quarter, with year to date growth of 7%.

In Europe, lager volume grew some 13% during the quarter on an organic basis, with year to date growth of over 9%. This has been driven by continuing good performances from Poland, Russia and Romania, influenced by an exceptionally mild winter. Worthmore volumes grew by 13% in the quarter, consistent with year to date growth.

Miller’s third quarter domestic sales to retailers (STRs) were 4.3% above the prior year and 0.9% below prior year on an organic basis excluding Sparks and Steel Reserve. Following management initiatives, STRs of flagship brand Miller Lite have grown by 1.5% in the quarter. STR performance for Miller, and particularly Miller Lite, was stronger in December. Miller’s shipments to wholesalers for the quarter grew less than STRs as distributor inventories reduced. For the year to date, Miller’s organic domestic STRs declined 2.8% after adjusting for the number of trading days in the period (3.3% unadjusted). Whilst Miller’s December STR performance has been encouraging, supported by increased marketing and sales programmes, price recovery and raw material costs were more adverse in the quarter than expected.

Africa and Asia business delivered organic growth of 30% in lager volumes in the quarter and 25% year to date, reflecting particularly strong growth in China of over 30% in the quarter. In Africa (excluding Zimbabwe) lager volumes grew by 10% in the quarter and 7% year to date, with volumes in Tanzania advancing 10% in the quarter. Strong gains were also achieved in Mozambique and Uganda, whilst a marginal decline in lager volume was recorded in Botswana in the quarter. CSD growth (excluding Zimbabwe) was 17% in the quarter and 21% year to date, which was led by continuing strong growth in Angola.

The group’s financial performance has been in line with our expectations outlined at the time of the interim results announcement, despite the headwinds experienced at Miller and in South Africa, and the comparatively weaker South African rand/US dollar exchange rate prevailing in the quarter.

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