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Thursday, 29 November, 2001, 17:57 GMT
Currency woes hit SAB profits
SAB delivery truck
Castle lager: SAB's leading brand
South African Breweries, the world's fifth largest brewer, has reported a dip in profits due to the South African rand's weakness against other world currencies.

The company said profits during the six months to September fell by 2.5% to $302m (215m), blaming a 16% decline in the rand against the dollar over the period.

Nearly half of SAB's profits are denominated in rands.

"The real problem has been the degree of our exposure and the quite extraordinary depreciation that has happened," SAB chief executive Graham Mackay told the BBC's World Business Report.

Although the company's profits were in line with expectations, separate reports that SAB has spent $537m (382m) acquiring a brewery in Honduras unnerved some investors.

"What we were able to do with this new transaction was find a beachhead, and perhaps further expansion in the region may be easier now that we are there," he added.

Shares see-saw

SAB shares closed down 6p at 472p on Thursday, having risen sharply the day before following reports that the company is being targeted for a possible takeover by Belgian drinks giant Interbrew.

Interbrew confirmed that it has carried out "preliminary analysis" of SAB which "may or may not" lead to a takeover bid, but both companies played down talk of a merger.

SAB facts
H1 sales $2.1bn
H1 profits $302m
H1 beer output 4.7bn litres

Mr McKay said he was "truly astonished" to hear of a potential bid by Interbrew.

The news triggered a strong reaction on the financial markets, wiping nearly 4% off Interbrew's share price on Wednesday, and even helping to support the South African rand against the dollar.

Strategic tie-up

Analysts said it would make good strategic sense for acquisition-hungry Interbrew to buy out SAB, which has built up a strong presence in many regions where the Belgian brewing giant has no presence.

A tie-up between Interbrew and SAB would create the second largest brewer in the world after Anheuser Busch, makers of Budweiser.

It would also pre-empt a previously mooted three-way merger between SAB, Scottish & Newcastle, and Miller Breweries.

SAB has brewing interests throughout Africa, as well as eastern Europe, Russia, China, and South America.

The company is also believed to be interested in acquiring Carling, the UK's top-selling beer, from current owners Bass.

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SAB Chief Executive Graham Mackay
"The real problem has been the degree of our exposure"
See also:

28 Nov 01 | Business
Interbrew eyes global expansion
08 Nov 01 | Business
Beer makers compete for Kingfisher
24 Oct 01 | Business
Boom predicted in Indian beer market
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