SABMiller, the owner of China’s Snow beer brand and South Africa’s Castle Lager, on Thursday reported a 16 per cent rise in annual pre-tax profits to $3.26bn as it raised prices to compensate for higher brewing costs, and warned that the cost of beer would continue to rise.

Graham Mackay, chief executive, said: “The worst of the inflation is still to come... a lot of price recovery still has to happen.”

Mr Mackay said the cost of agricultural raw materials used in brewing, like barley and hops, remained high and the brewer would continue to pass the costs on to consumers.

He said Europe was particularly hard hit by higher raw material costs, with hops prices rising ten-fold over the past year and barley prices three to four times higher.

“The whole agricultural supply situation in Europe is pretty dire,” he said.

However, SABMiller has withstood the cost increases and reported healthy sales for 2008, with lager volumes rising 7 per cent in the year to March 31. Total sales revenues rose 5 per cent to $21.4bn, and basic earnings per share were up 22 per cent to $1.35.

The shares rose 66p or nearly 5.5 per cent to £12.69, making them the biggest gainers on the FTSE 100.

The brewer maintained a confident outlook for the forthcoming year, even as it cautioned that higher food and energy prices were curtailing consumer spending, particularly in emerging markets.

“There’s no doubt that there has been a general slowing of consumer growth in emerging markets,” Mr Mackay said, adding that this was partially due to lower spending as a greater proportion of household budgets was devoted to food.

Higher interest rates in Colombia, where SABMiller is the country’s biggest brewer, contributed to a weakening in sales growth in the country, he said.

Sales in the US, where in recent years the group has fought a price war with market leader Anheuser-Busch, were better than expected, with underlying profits increasing by 13 per cent despite falling sales of Miller Genuine Draft.

Mr Mackay said the price war had “faded into the background” and SABMiller had led the industry in raising beer prices, putting them up some 4 per cent over the past year. The company also had success with a new version of Miller, Miller Chill, and better sales of Miller Lite.

The brewer won a legal case against its US aluminium supplier, receiving a $70m payout, and is no longer encountering a “price disadvantage” on aluminium, Mr Mackay said. The brewer had previously paid more for aluminium than other brewers due to the way its contracts were negotiated.

South Africa was SABMiller’s weakest region, with profits dropping 7 per cent to $1bn as the group struggled to pass on higher brewing, packaging, glass and transportation costs. The increase in oil prices, coupled with a weakening of the South African rand against other currencies, raised the brewer’s diesel costs by 47 per cent.

The brewer said it also took a $50m hit to profits from the loss of the Amstel brand last year after Heineken withdrew SABMiller’s rights to brew it.