SABMiller Plc’ share price up, posts a slower earnings growth due to declining sales in China and strong competition in Australia

The second-largest brewer in the world, SABMiller Plc, revealed in a statement today that the trading conditions are expected to remain challenging. The company reported an increase in its first-half profit that failed to reach analysts forecasts due to customer demand decline in China and Australia.

The Chief Executive Officer of the company, Alan Clark, said that unfavorable weather conditions in China hurt SABMillers sales in the region. As reported by the Financial Times, Mr. Clark also explained that in Australia the company “had to increase promotional spend” in order to handle the retail market, which has gained competitiveness.

Mr. Clark also said in an interview, cited by Bloomberg: “There is ongoing, increasing competition in Australia. We do think there is a rebasing of the level of competition in Australia, and we will continue to spend as we need to.”

SABMiller reported that its organic earnings before interest, taxes and amortization in the first half of the fiscal year increased by 3%. This fell short of the analysts projections of a 6% growth, excluding the acquisitions and currency flotations. The company also revealed a 0.3 percentage-point decline in its operating profit margin, which fell to 23.4%. As a result, its below-consensus earnings before interest, tax and amortization amounted to $3.3 billion, which fell short of analysts projections of $3.4 billion.

According to the company, its underlying pre-tax profits increased by 2% and reached $2.9 billion over the first half of the fiscal year. In October 2014 SABMiller announced that its lager volume fell by 1% on an organic basis over the first six months ended September.

Phil Carroll, an analyst at Shore Capital, commented on the companys performance in a note, cited by Bloomberg: “This is a surprisingly weaker-than-expected profit performance from SAB/ While we were aware that mix would likely be negative and put pressure on the gross margin, we expected its cost savings program and volume growth overall to offset this as it has in the past.”

SABMiller Plc added 1.68% to trade at GBX 3 570.5 per share as of 11:52 GMT, marking a one-year increase of 12.72%. The company is valued at GBP 57.14 billion.

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