LONDON -- My father has always been fond of telling me that if a thing looks too good to be true, it probably is. But in this case, I think he might be wrong.
This share has soundly outperformed the FTSE 100
It is, of course, the world's second-largest brewer, SABMiller (OTC: SBMRY).
Fancy a beer?
SABMiller's U.K. brands include Miller Genuine Draft, Peroni Nastro Azzuro, and Pilsner Urquell, but its growth markets are elsewhere -- and they're growing fast, as this table shows:
|
Region |
Contribution to Revenue |
Organic Earnings Growth, 2011-2012 |
|---|---|---|
| Latin America | 22.8% | 14% |
| Europe | 17.5% | (9%) |
| North America | 16.7% | 2% |
| Africa | 11.7% | 16% |
| Asia-Pacific | 11.2% | 30% |
| South Africa | 18.5% | 14% |
Have another one!
SABMiller is investing heavily in emerging markets, and it's paying off. What's more, the statistics suggest there is more to come.
Per-capita consumption of beer in SAB's Latin American markets tends to be around 40 to 50 liters per year. In Europe and Australia, it's around 80, suggesting that as Latin Americans become more affluent, they will consume more beer! Similar logic should apply in African and Asian markets, where per-capita consumption is even lower.
The results
SABMiller has just reported full-year revenues up by 12% to $21.7 billion -- with joint ventures contributing a further $10 billion in sales.
Underlying operating profit for the year rose by 11.7% to $3.98 billion, while profit before tax rose a whopping 54.5% to $5.6 billion, thanks to a $1 billion cash influx resulting from the sale of SAB's Russian and Ukrainian assets. This was part of a new alliance with Turkish brewer Anadolu Efes, which will be the vehicle for SAB's activities in Turkey, Russia, Central Asia, and the Middle East -- a massive market, collectively.
SAB has even given shareholders a cracking 12% dividend increase, taking the total payout for the year to $0.91 cents -- a yield of 2.4%. While this isn't income territory, it's acceptable for a share with such strong growth characteristics.
Pricey earnings
Like that other big U.K. booze share, Diageo
The only downside to SAB's acquisition-fueled expansion is that net debt shot up by 152% last year from $7.1 billion to $17.9 billion. This was thanks to the $10.6 billion cash payment it made as part of its purchase of Foster's. Despite this, the group's debt only accounts for 30% of its 38 billion pound market cap and should be manageable.
Where next?
For me, the icing on the cake is that I don't think you need to worry about timing the end of SABMiller's growth cycle.
Even if it does happen, the group's huge global footprint and efficiencies of scale should mean that it will continue to be a highly profitable business. I think that as its emerging markets mature, SABMiller will transition into a more generous dividend-payer that should remain an attractive fit in most long-term portfolios.
Let me round off by telling you the "consumer brands" sector is one of three industries reviewed in this free Fool report. I am sure this guide should be of interest to all long-term investors.
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