SABMiller lowers Latam target due to softer demand

LONDON (Reuters) - SABMiller (SAB.L), the world's biggest brewer, lowered the beer volume growth target for one of its key regions, Latin America, on Monday due to softer consumer demand, especially in Colombia and Peru.

The brewer is cutting its medium-term annual beer volume growth target to 5 to 7 percent from a previous 6 to 8 percent, although price rises and cost cutting mean it will be able to hold its target for annual profit margin rises.

"We are lowering the target due to the slightly softer consumer environment," said SABMiller President Barry Smith at a group investor seminar on Latin America.

The company, which brews Aguila beer in Colombia and Cristal in Peru, showed an increase in regional beer volumes of 5 percent in its year to March 2008, while earnings before interest, tax and amortisation (EBITA) went up 17 percent.

The region produces a quarter of SABMiller's profits, just behind South Africa at 28 percent, and analysts and company officials say Latin America will become the group's biggest profits earner in the current year to March 2009.

The brewer operates in six Latin American nations with Colombia earning around 60 percent of regional profit and Peru around a quarter. It also operates in Ecuador, Panama, Honduras and El Salvador.

Smith says SABMiller has seen a slowdown in consumption expenditure mainly due to higher inflation, especially food, while in Colombia higher interest rates and a move from consumables to durables like TVs has hit beer market growth.

SABMiller has sought to offset the volume slowdown by raising prices and making productivity gains, and so looks to hold its EBITA margin target unchanged and aim for a 60 to 100 basis point percentage rise each year in the medium-term.

In Colombia, the group raised its annual beer prices on average by 5.4 percent over the past two years, but this failed to keep pace with national inflation running at 5.8 percent in 2007 and food inflation at 8.0 percent.

SABMiller expanded rapidly in Latin America in 2005 with the acquisition of Bavaria, giving the group a 98 percent share of the beer market in Colombia and 84 percent in Peru. Its biggest competitor in Latin America is InBev INTB.BR, which controls around two-thirds of the Brazilian beer market.