Emerging markets growth helps offset declines in Europe and the US.
Brewing giant SABMiller (LSE: SAB) announced its results for the final quarter of 2011 today. The firm is the world's second largest brewer, and owns famous brands such as Miller Lite, Peroni and Grolsch.
The amount of beer sold rose by 3%, excluding acquisitions and disposals, in the three months to 31 December, which suggests slow but steady growth. But the results can really be divided into two halves.
Developed markets slump, emerging markets boom
On the one hand, sales in developed markets declined, with sales in Europe falling 2% and US sales slumping by 3.3%. The company said that it was facing "intense competition", as well as "fragile economic conditions".
What do they mean by "intense competition"? Well, I have certainly noticed that there seems to be ever more promotions and discounts for beer in my local supermarket. When I buy so much of my beer at knock-down prices, it makes me wonder how the brewers make their money. Clearly, these discounts have been hitting SABMiller's bottom line.
Yet while the company has had difficulties in the developed world, in emerging markets it is booming. Latin America is the business's biggest market, and volumes were up a healthy 8%. Likewise, sales of beers such as Castle Lite and Castle Lager in Africa led to 11% growth, and there was 2% growth in South Africa. And sales were also up 7% in Asia Pacific.
A little pricey for my liking
In fact, with SABMiller now making 70% of its profits in emerging markets, the company really is a play on emerging market growth.
In September of last year, the firm bought Australian brewer Fosters for $10.9 billion. But the acquisition has disappointed so far, with a 6% fall in volume.
So, overall, is SABMiller a buy? Well, I do like the company; it has some great global brands, and the fact that most of its profits are now made in emerging markets does point to good long-term growth prospects.
But this growth does come at a price, with the business on a forward P/E ratio of 17, and a dividend yield of just 2%. SABMiller's shares have had a great run over the past three years, but currently the company does look a little too expensive for my liking.
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