UPDATE 3-SABMiller caution hits shares after narrow EPS miss

* Year adjusted earnings 161.1 cents vs forecast 163.3 cents

* Sees recovery in spending only by its second half

* Raw material costs for year to be level or marginally down

* Sees no dramatic effect from football World Cup

* Shares down 5.4 percent on cautious outlook

(Rewrites with chief executive quotes, updates shares)

By David Jones

LONDON, May 20 (BestGrowthStock) – Brewing giant SABMiller (SAB.L: )
expects consumer spending only to recover at the end of 2010
disappointing investors who had looked for a big boost from a
strong emerging market-led recovery and falling commodity costs.

The world’s number two brewer which earns over 85 percent of
its profit from emerging markets posted a 17 percent rise in
annual earnings which narrowly missed forecasts, and its caution
over 2010 sent its shares down on Thursday.

The brewer of Miller Lite, Peroni and Grolsch reported
strong profits growth from Latin America, Africa and China, but
eastern Europe was “pretty depressed” and it is still suffering
from a declining beer market in the United States.

“What we are seeing in the world is an uneven recovery,
there is slow recovery in emerging markets and this will
continue but it is not particularly strong,” Chief Executive
Graham Mackay said on a results telephone briefing.

“A broader recovery in consumer spending is not expected
before the second half of the current financial year,” he added
referring to the group’s current year to March 2011.

While hopes of a recovery were delayed, the anticipated big
gains from commodity costs did not materialise as although some
costs such as barley had fallen others such as glass and
aluminium were rising, and Mackay said raw material input prices
would be level or marginally down in the current year.

SABMiller shares slipped 5.41 percent to 19.25 pounds by
0902 GMT in a rising market to be FTSE 100 index’s (.FTSE: )
second biggest faller.

“We interpret the outlook statement as slightly cautious….
We infer from this that current trading, whilst through the
worst, continues to vary by region,” said analyst Matthew Webb
at broker JP Morgan Cazenove.

Mackay was cautious over the upcoming football World Cup
which starts next month in South Africa where the brewer has a
near 90 percent share of the national beer market and is its
biggest source of profit.

“There may be a uptick of 4,5,6 percent in volumes during
the event which may translate to up to 1 percent for the year as
a whole for South Africa and there maybe an uptick elsewhere but
there will not be a dramatic effect to our numbers,” he said.

The London-based group reported adjusted earnings per share
of 161.1 U.S. cents for the year to end-March, compared with
consensus of 163.3 cents from a Reuters survey of 10 analysts
and 161.6 cents from a company compiled consensus.

The full-year dividend rose 17 percent to 68 cents a share.

Overall beer volumes for the 12 months to end-March were
flat on an underlying basis after stripping out the effect of
acquisitions, but in the first three months of 2010 they had
picked up 2 percent fuelling optimism over the recovery.

SABMiller’s beer volumes have been hit by the global
downturn while its move to raise prices to cover commodity cost
hikes also crimped growth, but falling barley costs and a
recovery is expected to help the group in 2010.

Brewers are looking to emerging markets for growth, with the
world’s biggest brewer, Anheuser-Busch InBev (ABI.BR: ), getting a
big boost from Brazil in the first quarter, while Heineken
(HEIN.AS: ) and Carlsberg (CARLb.CO: ), which have more operations
in developed markets, have struggled for growth. [ID:nLDE6421LX]
SABMiller shares have risen nearly 14 percent this year on
hope of emerging markets recovery, outperforming the FTSE 100
(.FTSE: ) by 16 percent.

Its large exposure to rebounding emerging markets has pushed
its shares to trade at 16.4 times forecast March 2011 earnings,
ahead of AB-InBev on 15.7, Carlsberg’s 15.1 and Heineken’s 14.1.

Investment Research

(Reporting by David Jones, editing by Will Waterman and Sharon
Lindores)

UPDATE 3-SABMiller caution hits shares after narrow EPS miss