SABMiller Shares Decline After Heineken Ends Pact MOVERS MARKETPLACE By Bloomberg

By Amy Wilson

Shares of SABMiller, the brewer, declined Tuesday after Heineken said it would end SABMiller’s 40-year-old contract to make Amstel lager in South Africa, where SABMiller controls almost all of the beer market. SABMiller said it would lose $80 million a year of earnings before interest, taxes and amortization, worth about 3 cents a share, in the next fiscal year. Amstel lager is a premium beer in South Africa, with a market share of 8 percent. “This is the first major step to challenge SABMiller’s dominant position in its local market,” Chris Pitcher of UBS in London wrote in a note. “SABMiller loses a very successful brand with the growing black middle class.” Pitcher has a “reduce” recommendation on the stock. SABMiller, based in London, was founded in South Africa in 1895 and controls about 97 percent of the national beer market, mostly with its Carling brand. The brewer stopped producing Amstel on Monday after the International Chamber of Commerce found that SABMiller’s 2005 takeover of Grupo Empresarial Bavaria, a major brewer in South America, involved a “material change in shareholding” that gave Heineken the right to end the license. The shares SABMiller fell 50 pence, or 4.4 percent, to close at l10.85, or $20.96, in London

The South African government tried to dilute SABMiller’s control over the liquor industry in 2003, proposing a law that would require brewers to sell their retail outlets and distribution networks. The law was toned down after objections from liquor companies, which complained that they would be prevented from running their businesses efficiently. Amstel accounts for 9 percent of SABMiller’s beer sales in South Africa, according to a statement Tuesday, and will contribute $300 million of revenue this fiscal year, which ends on March 31. To counter the loss of the contract, SABMiller aims to sell more of its premium brands Pilsner Urquell and Peroni Nastro Azzurro and will look at introducing new versions of existing South African brands, said a spokesman, Nigel Fairbrass. Merrill Lynch analysts cut estimates for per-share earnings by 4 percent to 127.4 cents in the 2008 fiscal year and to 144 cents in 2009. Amstel sales account for 3.5 percent of SABMiller’s earnings before interest, taxes and amortization, the analysts wrote. Heineken, which is planning a brewery in South Africa, will not make any more profit for at least two years as a result of taking back the contract, according to the Merrill note, because of the costs to import Amstel from Europe and the loss of SABMiller’s fee to brew under license.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.