SABMiller Raises Cost-Savings Target

LONDON—SABMiller PLC on Friday upped its cost-savings target by over $550 million, the London-based brewer's latest attempt to underscore the strength of its business in the face of a takeover approach by Anheuser-Busch InBev NV.

SABMiller has raised its annual savings target from a cost-cutting program it announced in May of last year, while also extending the timeframe within which it expects to achieve the savings. The brewer now expects to save at least $1.05 billion by the end of March 2020, up from the $500 million it had committed to saving by the end of March 2018.

Chief Executive Alan Clark said while SABMiller is "already a highly efficient business" with strong margins, "we are continuing to remove duplication across markets, bringing specialist expertise in areas like procurement under one roof, and standardizing common processes."

The latest statement comes after SABMiller recently brought forward a trading update slated for Oct 15, on Tuesday reporting its sales in the three months ended Sept. 30 rose 6% from the comparable period a year earlier, driven by 9% growth in Latin America and 11% in Africa. Sales for the first six months of the financial year were up just 4%, reflecting a second-quarter improvement.

SABMiller wasn't required to release its results before the offer period for a bid from AB InBev closes, but did so to give shareholders more information about how the company was performing before the so-called "put-up-or-shut-up" date of Oct. 14,by which AB InBev needs to make a bid for the smaller brewer or walk away.

SABMiller said the additional savings will come from its supply chain, with about 70% of the additional savings announced Friday coming from procurement and 30% from manufacturing and distribution. The beer maker expects to take $26 million in costs tied to the program by 2020.

SABMiller noted that in coming up with the new targets it has assumed that there will be no change in ownership or control of the company.

Over the past three weeks SABMiller has rejected three proposals from AB InBev, including its latest proposal of £ 42.15 ($64.80) a share in cash alongside a less valuable cash-and-stock deal available to 41% of SABMiller's shareholders, saying this undervalues the company.

On Wednesday, SABMiller responded to AB InBev's proposal, saying its board "is confident that SABMiller's management team will create sustainable shareholder value through its strong differentiated standalone strategy." Among other things, SABMiller said it has "an unmatched footprint in fast growing developing markets," and noted that it was continuing to work to optimize resources and reduce costs.

Write to Saabira Chaudhuri at [e-mail]

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(END) Dow Jones Newswires

October 09, 2015 05:05 ET (09:05 GMT)

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