| Thu 20 May 2010, 20:00 | | SAB - SABMiller Plc - Preliminary announcement |
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SAB
SOSAB
SAB - SABMiller Plc - Preliminary announcement
SABMiller Plc
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
PRELIMINARY ANNOUNCEMENT
20 May 2010
STRONG PERFORMANCE IN CHALLENGING CONDITIONS
SABMiller plc, one of the world`s leading brewers with operations and
distribution agreements across six continents, reports its preliminary
(unaudited) results for the twelve months to 31 March 2010.
OPERATIONAL HIGHLIGHTS
- Lager volumes of 213 million hectolitres (hl), in line with the prior year on
an organic basis; share gains in many markets
- Group revenue up 4% and EBITA up 6% with margin growth of 30 basis points
(bps) driven by robust pricing and cost efficiencies
- EBITA1 increases in all regions except Asia:
- Latin America delivers strong EBITA1 growth of 17% through pricing and cost
productivity
- Solid pricing and cost management in Europe drive EBITA1 growth of 4% despite
lower volumes
- Cost synergies deliver EBITA1 growth of 7% in North America
- Resilient lager volume growth in Africa underpins EBITA1 growth of 4%
- Asia EBITA1 level as strong China growth is offset by constraints in India
- South Africa Beverages EBITA1 grows 2% despite increased market investment
- Adjusted EPS up 17% with operating performance enhanced by lower finance costs
and a reduced tax rate
- Strong free cash flow2 of US$2,010 million, with dividends per share up 17%
1 EBITA growth is shown on an organic, constant currency basis.
2 As defined in the financial definitions section. See also note 10b.
2010 2009 %
US$m US$m change
Group revenuea 26,350 25,302 4
Revenueb (excludes associates` and 18,020 18,703 (4)
joint ventures` revenue)
EBITAc 4,381 4,129 6
Adjusted profit before taxd 3,803 3,405 12
Profit before taxe 2,929 2,958 (1)
Adjusted earningsf 2,509 2,065 22
Adjusted earnings per share
- US cents 161.1 137.5 17
- UK pence 100.6 79.7 26
- SA cents 1,253.8 1,218.6 3
Basic earnings per share (US cents) 122.6 125.2 (2)
Dividends per share (US cents) 68.0 58.0 17
a Group revenue includes the attributable share of associates` and joint
ventures` revenue of US$8,330 million (i.e. including MillerCoors` revenue)
(2009: US$6,599 million).
b Revenue excludes the attributable share of associates` and joint ventures`
revenue.
c Note 2 provides a reconciliation of operating profit to EBITA which is
defined as operating profit before exceptional items and amortisation of
intangible assets (excluding software) but includes the group`s share of
associates` and joint ventures` operating profit, on a similar basis. EBITA is
used throughout this preliminary announcement.
d Adjusted profit before tax comprises EBITA less adjusted net finance costs
of US$538 million (2009: US$699 million) and share of associates` and joint
ventures` net finance costs of US$40 million (2009: US$25 million).
e Profit before tax includes exceptional charges of US$507 million (2009:
US$69 million).
f A reconciliation of adjusted earnings to the statutory measure of profit
attributable to equity shareholders is provided in note 6.
Meyer Kahn, Chairman of SABMiller, said:
"In a year characterised by very difficult trading conditions, the business has
delivered another strong performance, capitalising on our excellent market
positions and unique portfolios of leading local and international brands.
Profits and cash flow have improved significantly, and at the same time, we have
continued to support current and future growth opportunities, particularly in
our developing market businesses."
Organic,
constant
2010 Reported currency
EBITA growth growth
US$m % %
Latin America 1,386 18 17
Europe 872 (8) 4
North America 619 7 7
Africa 565 1 4
Asia 71 (12) -
South Africa: Beverages 885 16 2
South Africa: Hotels and Gaming 122 1 (16)
Corporate (139) - -
Group 4,381 6 6
BUSINESS REVIEW
The group delivered a strong performance despite difficult economic and
operating conditions which began to moderate in some of our developing markets
in the final quarter of the year. Total beverage volumes of 261 million hl were
in line with the prior year on an organic basis, with lager volumes level and
soft drinks volumes up 2%. Sales were supported by share gains in many markets,
and group revenue grew 4% driven by price increases taken principally in the
prior year and selectively in the current year.
On an organic, constant currency basis, EBITA grew by 6% with margin up by 30
bps on the prior year to 16.7%. Raw material costs were marginally higher than
the prior year, with cost increases moderating during the second half. Brewing
raw material costs began to trend lower later in the year, although packaging
and sugar costs continued to rise. Focus was maintained on cost management and
productivity, with synergies and cost restructuring benefits offsetting
increases in depreciation, paycost inflation and, in some markets, increased
investment in brand and retail execution. EBITA also grew 6% on a reported
basis, with the significant adverse currency impact in the first half offset in
the second half as our major operating currencies appreciated against the US
dollar.
Adjusted earnings were 22% ahead of the prior year reflecting EBITA growth,
lower finance costs, a lower effective tax rate and reduced profit attributable
to minorities. The minority share of profit declined principally as a result of
our purchase of the 28.1% minority interest in our Polish subsidiary Kompania
Piwowarska in May 2009, in exchange for the issue of 60 million ordinary shares.
The group`s effective tax rate for the year was 28.5%, 170 bps lower than the
prior year. Adjusted earnings per share were up 17% to 161.1 US cents.
The group generated free cash flow of US$2,010 million, an improvement of
US$1,913 million compared with the prior year. Significant improvements were
made in working capital management, with a considerable contribution from the
business capability programme initiatives announced earlier in the year. Cash
inflow from working capital was US$563 million, compared with an outflow of
US$493 million in the prior year. Capital expenditure including the purchase of
intangible assets was US$1,528 million, US$619 million lower than the prior year
reflecting the completion of several major projects.
Net debt decreased by US$311 million to US$8,398 million, reflecting the strong
cash flow but partly offset by adverse currency translation. The group`s
gearing ratio fell to 41% from 54% in the prior year. The Board has recommended
a final dividend of 51 US cents per share, which will be paid to shareholders on
13 August 2010. This brings the total dividend per share to 68 US cents, an
increase of 10 US cents (17%) over the prior year.
- LATIN AMERICA delivered very strong EBITA growth of 18% on a reported basis
and 17% on an organic, constant currency basis through the combination of volume
growth, pricing and mix benefits, lower raw material costs and fixed cost
productivity. Despite challenging trading conditions for much of the year,
lager volumes grew 3%, supported by good growth in the final quarter as
economies showed signs of improvement. During the year we achieved further
share gains. In Colombia, lager volumes grew 3% during the year with robust
growth during the second half supported by strong market execution and a
strengthening economy. This was achieved notwithstanding a price increase to
recover higher beer sales taxes implemented in February 2010. In Peru, lager
volumes were in line with the prior year reflecting a return to growth in the
second half of the year due to improving economic conditions and ongoing market
share gains.
- EUROPE`S lager volumes declined 5% on an organic basis, as beer markets across
the region contracted under severe economic conditions compounded by significant
excise increases in some key markets. Against this backdrop, we gained market
share in Poland and Romania and held share in the Czech Republic and Russia.
Despite the volume decline, robust pricing taken predominantly in the prior
year, combined with cost efficiencies, supported constant currency EBITA growth
of 4% on an organic basis. Reported EBITA declined 8% reflecting a significant
weakening of central European currencies against the US dollar.
- NORTH AMERICA delivered EBITA growth of 7% for the year on a reported basis
compared to the previous year which included one quarter of Miller Brewing
Company operations prior to the formation of the MillerCoors joint venture.
MillerCoors delivered pro forma1 EBITA growth of 13% despite a sluggish US beer
market impacted by continued adverse economic conditions. On a pro forma basis,
MillerCoors domestic sales to wholesalers (STWs) and sales to retailers (STRs)
for the year were both down 2%. EBITA growth was driven by favourable pricing,
incremental synergy benefits and marketing and fixed cost savings, partly offset
by lower volumes and commodity cost pressures. During the year, incremental
synergy and cost savings of US$281 million were delivered resulting in total
annualised synergy and cost savings of US$409 million. MillerCoors remains on
track to deliver US$750 million in total annualised synergies and other cost
savings by the end of the calendar year 2012.
- In AFRICA, our beer markets were broadly resilient, with the majority
continuing to grow through the year albeit at a slower rate than in recent
years. Lager volumes grew 6% with Mozambique, Zambia and Uganda delivering
strong growth supported by improved geographical coverage following new brewery
investments, excise reductions and capacity expansion respectively. Botswana`s
lager volumes were severely impacted by the social levy on alcohol introduced in
November 2008, while volumes in Tanzania fell in line with a market affected by
unseasonable weather earlier in the year. Soft drinks volumes grew 4%
organically for the year. We continued to grow our beverage platforms with the
acquisition of water businesses in Ethiopia and Uganda and of a maheu business,
a non-alcoholic traditional beverage, in Zambia. During the year, we invested
in new breweries in Angola, Mozambique, Southern Sudan and Tanzania and upgraded
capacity in Uganda and Zambia. Currency weakness held back reported EBITA
growth to 1% while constant currency EBITA grew 4% on an organic basis
underpinned by volume growth and beneficial mix impact from the introduction of
local premium lager brands.
- In ASIA, lager volumes increased organically by 7% with growth of 10% in
China. China benefited from further share gains by the Snow brand supported by
the launch of the new premium variant, Snow Draft. India`s volumes fell 14%
with some market share loss due to regulatory issues and increased taxes across
certain states, although conditions improved towards the end of the year. In
Australia, the portfolio of premium brands continued to deliver strong growth
with lager volumes up 32%. Organic, constant currency EBITA was level, with
good growth in China offset by the impact of India`s volume decline. Reported
EBITA, which includes initial losses in recent Chinese acquisitions, fell 12%.
1 MillerCoors pro forma figures are based on results for Miller and Coors` US
and Puerto Rico operations reported under International Financial Reporting
Standards (IFRS) and US GAAP respectively for the twelve months ended 31 March
2009. Adjustments have been made to reflect both companies` comparative data on
a similar basis including amortisation of definite-life intangible assets,
depreciation reflecting revisions to property, plant and equipment values and
the exclusion of exceptional items.
- In SOUTH AFRICA, lager volumes were 1% below the prior year in a market that
grew marginally. The market was buoyed by the inclusion of two Easter buy-in
periods within the financial year although consumer spending remained generally
subdued. Our lager sales benefited from refreshed positioning and communication
for our core brands, together with increased investment in sales capability and
customer service. Soft drinks volumes declined 1% during the year due to the
weak economic environment and unfavourable weather conditions during the peak
summer trading period. Organic, constant currency EBITA grew 2% although margin
declined slightly as pricing benefits and fixed cost productivity were eroded by
higher input costs and intensified marketing spend. On a reported basis, EBITA
grew 16% benefiting from the strength of the rand relative to the US dollar over
the year. The broad based black economic empowerment transaction that was
announced on 1 July 2009 will be completed in June 2010. The deal will benefit
employees, soft drinks and liquor retailers and the wider South Africa community
by placing 8.45% of the equity of The South African Breweries Limited under
black ownership.
- As announced previously, the group has embarked on a major business capability
programme to simplify processes and reduce costs, enabling local management to
focus more on market-facing activities. Back office functions including
finance, human resources and procurement will be streamlined through standard
global information processes and applications, while front office processes
including sales, distribution and supply chain management, will benefit from
common regional platforms. The programme remains on track to be completed by
2014, delivering ongoing cost benefits of US$300 million per annum by 2014. In
the current financial year, we have realised substantial working capital
benefits of US$333 million while recognising exceptional costs of $342 million
relating to the programme. In addition, exceptional charges of US$165 million
were taken in respect of other projects, predominantly to raise efficiency
through brewery restructuring in Europe and Colombia (US$123 million) and the
integration of MillerCoors (US$18 million).
OUTLOOK
Although the economic environment began to improve for some of our emerging
market businesses in the latter part of the financial year under review, a
broader recovery in consumer spending is not expected before the second half of
the current financial year. Price increases will be taken selectively,
predominantly in the second half, and we expect raw material input costs for the
year to be level with, or marginally down on, the prior year. We will continue
to implement our cost productivity initiatives while increasing investment in
our brands.
The group`s brand equities and its financial position remain strong and we are
well positioned to take advantage of any improvement in trading conditions.
Enquiries:
SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Corporate Tel: +44 20 7659 0184
Affairs
Gary Leibowitz Senior Vice President, Tel: +44 20 7659 0119
Investor Relations
Nigel Fairbrass Head of Media Relations Mob: +44 77 9989 4265
A live audiocast of the management presentation to the investment community will
begin at 9.30am (BST) on (20 May 2010).
Access details for this audiocast, video interviews with management and copies
of this announcement and the slide presentation are
available on the SABMiller plc website at www.sabmiller.com.
IMAGES: Our media image library has a large selection of images for use in print
and digital media.
Visit www.sabmiller.com/imagelibrary
BROADCAST FOOTAGE: Our broadcast footage library has stock footage for media
organisations to view and download for use in TV programmes or news websites.
Visit www.sabmiller.com/broadcastfootage
Copies of the press release and detailed Preliminary Announcement are available
from the Company Secretary at the Registered Office, or from 2 Jan Smuts Avenue,
Johannesburg, South Africa.
OPERATIONAL REVIEW
LATIN AMERICA
Financial summary 2010 2009 %
Group revenue (including share of 5,905 5,495 7
associates) (US$m)
EBITA (US$m) 1,386 1,173 18
EBITA margin (%) 23.5 21.4
Sales volumes (hl 000)
- Lager 38,075 37,138 3
- Soft drinks 15,895 18,509 (14)
- Soft drinks (organic) 15,895 15,071 5
In 2010 before exceptional charges of US$156 million being business capability
programme costs of US$97 million, restructuring and integration costs of US$14
million and impairments of US$45 million (2009: net exceptional credits of US$45
million being profits on disposal of the Colombian water business and the
Bolivian soft drinks operations of US$89 million, net of integration and
restructuring costs of US$31 million and a US$13 million charge in respect of
litigation).
In a year characterised by difficult economic and trading conditions across
Latin America, management delivered EBITA growth of 18% on a reported and 17% on
an organic constant currency basis. The year saw lager volume growth of 3%
benefiting from enhanced sales execution with a strong fourth quarter supported
by signs of improving economic conditions across the region. We grew or held
market share in most of our markets while revenue was boosted by strong pricing
taken last year and beneficial mix resulting in organic revenue per hectolitre
growth of 4% at constant currency. Margin was further enhanced by marketing
efficiencies and restructuring benefits.
In COLOMBIA we performed strongly, delivering a 270 basis point improvement in
EBITA margin on an organic, constant currency basis, and significantly improved
cash flow generation. Revenue was supported in the first half of the year by
price increases taken in the prior year while the second half benefited from
volume recovery and continued mix improvement. Full year lager volumes grew 3%,
with a particularly encouraging last quarter. Fourth quarter lager volumes grew
by 13%, albeit against a soft prior year comparative, assisted by Easter trading
and strong market execution, notwithstanding a price increase to recover the
beer tax rise imposed in February. Our share of the alcohol market remained in
line with the prior year at approximately 66%. Volumes benefited from our
balanced brand and pack portfolio and efforts to attract a wider consumer base
and drive consumption frequency. Premium brand volumes increased 29% aided by
strong growth of Club Colombia and Redd`s. Mainstream brand volumes grew 2%,
with Aguila Light continuing to outperform on the back of a trend to lighter
beer. We continued our focus on improving customer service and trade execution,
whilst working with retailers to increase affordability. Raw material costs
benefited from lower prices, while fixed costs improved in real terms following
restructuring and cost reductions. In February 2010, the business announced
plans to transfer production from its central Bogota brewery to the nearby
Tocancipa facility. As a result, a US$59 million exceptional charge has been
taken in the year, of which US$45 million relates to the impairment of asset
values. The initiative is expected to have a payback of less than two years.
In PERU we continued to gain beer market share with both volume and value share
growing to approximately 90%. Improved trading in the fourth quarter lifted
lager volumes to end the year in line with the prior year. Profitability grew
strongly benefiting from a national price increase in April 2009 and positive
sales mix resulting from growth of our premium brands and contraction of the
economy segment. Our local premium brand, Cusquena, grew volumes 7%.
Mainstream brands grew 1% as they recovered share from the economy segment led
by Pilsen Callao, which is priced at the upper mainstream in some markets.
Following the introduction of a new IT platform as part of the ongoing group
business capability programme, direct distribution now accounts for 76% of all
deliveries and management of trade receivables has improved. Fixed cost
control, more effective marketing spend and containment of raw material costs
further enhanced EBITA margin.
Our operations in ECUADOR saw robust growth with two increases in national
minimum wages supporting consumer spending. Lager volumes grew by 9% with 37%
growth from the premium segment reflecting the continued success of our local
premium brand, Club, following its relaunch in the prior year. Our flagship
mainstream brand, Pilsener, also grew strongly, assisted by the launch of a new
225ml returnable pack in January. In the non-alcoholic malt beverage category,
our brand Pony Malta saw growth of 19% following pack extensions. Continued
development of the sales and distribution model in the provincial areas led to
simultaneous improvements in service levels, efficiencies and reach resulting in
better outlet coverage and product availability. Outlet penetration rose 5% to
85%. In a highly dynamic market, our share of the alcohol market remained at
44%.
HONDURAS endured both deteriorating economic conditions following the global
financial crisis, and political turmoil, which continued for much of the year.
As the political situation deteriorated, our operations took action to protect
our route-to-market, secure supply and maintain customer service. Total volume
growth of 5% was achieved with growth of soft drinks offsetting lower lager
volumes. Sparkling soft drinks grew share to 56% with good growth by our
Tropical brand and the Coca-Cola brand. Despite lower lager volumes and
stronger pricing, we increased our share of the alcohol market from 40% to 49%
supported by increased outlet penetration and superior sales execution.
In PANAMA total volumes grew by 4%, with lager volumes up 1% in an increasingly
competitive environment. Soft drinks volume grew 7%, boosted by the excellent
performance of Malta Vigor following its re-launch in the prior year and higher
availability of non-carbonated soft drinks.
In EL SALVADOR total volumes grew 8% with strong soft drink sales in a fast
growing soft drinks market. We maintained our leadership in sparkling soft
drinks with a 55% market share. Our juice volumes grew 46% following the launch
of a new brand, Jugos del Valle Fresh, in August 2009, while lager volumes were
in line with the prior year.
EUROPE
Financial summary 2010 2009 %
Group revenue (including share of 5,577 6,145 (9)
associates) (US$m)
EBITA (US$m) 872 944 (8)
EBITA margin (%) 15.6 15.4
Sales volumes (hl 000)
- Lager 45,513 47,237 (4)
- Lager (organic) 44,872 47,237 (5)
In 2010 before exceptional charges of US$202 million being US$64 million of
integration and restructuring costs and US$138 million of business capability
programme costs (2009: US$452 million being the impairment of non-current assets
of US$392 million, integration and restructuring costs of US$51 million and the
unwind of fair value adjustments on inventory following the acquisition of
Grolsch of US$9 million).
In EUROPE, lager volumes declined 4% on a reported basis and 5% on an organic
basis as the beer market continued to be impacted by depressed consumer spending
as a result of increased unemployment and tighter credit across the region.
During the year, a number of markets also faced significant increases in excise,
which have been substantially passed on in price increases. Against this
backdrop, we grew or maintained market share in our key markets and increased
our share of the premium segment.
Organic, constant currency revenue per hectolitre grew 6% reflecting strong
pricing in the first half, which moderated in the second half. This, combined
with improved cost efficiency, drove an organic, constant currency EBITA
increase of 4% and organic margin expansion of 60 bps. Marketing expenditure
was lower than in the prior year which included local sponsorship of the Euro
2008 football championships and the Olympics. Fixed costs and depreciation
increased due to expanded sales and distribution reach and capacity in both
Russia and Romania. Central European currencies were considerably weaker than
in the prior year, impacting raw material costs, but we nevertheless achieved a
small improvement in variable production costs. Reported EBITA declined by 8%.
In POLAND, lager volumes were down 3% although we grew market share, reflecting
a sustained focus on sales execution and trade programmes. Brand activities
centred on Tyskie, Poland`s leading brand, as sponsor of the International Year
of Beer, driving an increase in brand market share for the third consecutive
year. Zubr also captured significant market share, growing volumes by 3%. In
the premium segment, we increased our value share, and Grolsch was successfully
launched in the super-premium segment. Revenue per hectolitre grew 4% in
constant currency terms. In September 2009 we announced the closure of the
Kielce brewery and three distribution centres.
In the CZECH REPUBLIC, the market was impacted by higher unemployment and
significant increases in VAT and excise in January 2010. Our domestic lager
volumes declined 5%, reflecting a 7% fall in the on-premise channel which has
been severely affected by economic pressures and lower tourism. Despite this,
we maintained market share with our brands now occupying the number one, two and
three market positions. Our combined super-premium and premium portfolio grew
over 6% with all key brands growing market share. The performance of Pilsner
Urquell, underpinned by strong and improving brand health, was particularly
noteworthy given its price premium. The market-leading brand, Gambrinus,
continued to be negatively affected by its significant exposure to the on-
premise channel; however the higher priced variant Gambrinus 11 performed well,
maintaining its leadership of the semi-premium segment. In the mainstream
segment, Kozel enjoyed another exceptional year, growing 5% and consolidating
its position as Czech`s number two brand. Improved overhead productivity led to
an EBITA margin expansion of over 100 basis points.
ROMANIA suffered a severe recession during the year and our lager volumes fell
13% on an organic basis in a market that declined 24%. We took market
leadership with share improving by 400 bps to reach 32% over the year. The
mainstream segment continued to grow at the expense of premium and economy
sectors as consumers sought brands with strong value propositions. Our largest
brand, Timisoreana, continued its strong performance with volume growth of 2%.
We increased our share in the off-premise channel with intensive 360 degree
brand activation and strong display support and took market leadership of the
growing key accounts sub-channel. We maintained our leadership of the declining
on-premise channel. Revenue per hectolitre grew 9% at constant currency,
although EBITA declined due to reduced volumes and increased depreciation
following investment in the prior year. During the year we strengthened our
economy segment with the acquisition of the Azuga operations and we closed the
acquired brewery, as planned.
In RUSSIA, a significant increase in excise in January 2010 and a sharp decline
in consumer disposable income led to a drop in industry beer production and
sales. Our lager volumes were down 5% but our market share was maintained.
Repositioning, renovation and line extensions on Zolotaya Bochka lifted the
brand to number two in the premium segment, while the Kozel brand delivered 13%
volume growth to become the number one licensed brand in Moscow. In September
2009, we launched Grolsch with brand equity indicators showing good growth
potential. In May 2009, we opened the new brewery in Ulyanovsk, in line with
our geographic expansion strategy; and launched the Tri Bogatyrya economy brand
in a new PET format leading to a doubling of the brand`s volume. Brand mix
partially diluted the strong pricing taken in the prior year but we still
achieved revenue per hectolitre growth of 7% at constant currency. In the
Ukraine, the Sarmat brand was relaunched but volume performance was severely
impacted by a 94% increase in excise in July 2009. Volume growth on licensed
brands Kozel and Zolotaya Bochka was very strong, benefiting mix and driving
revenue per hectolitre growth.
In ITALY, economic conditions remained negative, although the second half saw
some signs of stabilisation. Birra Peroni volumes declined 7% during the year as
we reduced promoted volume and stock in trade levels. Our market share of STRs
was marginally below the prior year while constant currency revenue per
hectolitre grew 4% reflecting strong pricing and improved channel mix. This
combined with refocused marketing investment behind core brands, production
efficiencies and fixed cost productivity drove an improvement in EBITA.
Domestic lager volumes in the NETHERLANDS declined 2%, in line with the branded
market; a solid result given heavy competitor discounting and off-premise
consolidation in the year. Restructuring initiatives taken in the prior year
began to deliver benefits with fixed costs down 5%.
In the UNITED KINGDOM, lager volumes grew 14% on a comparable basis, with Peroni
Nastro Azzurro sales up 29% following strong growth in on-premise channels and
in key national retailers. During the year, exports of Miller Genuine Draft to
Ireland were taken over by our UK business following the termination of the
previous licensing arrangement.
In HUNGARY, SLOVAKIA and the CANARIES, economic conditions remain difficult and
beer markets depressed. We grew market share in Hungary and maintained share in
Slovakia and the Canaries, despite the decline in the on-premise channel. In
November 2009 we announced the closure of the Topolcany brewery in Slovakia.
NORTH AMERICA
Financial summary 2010 2009 %
Group revenue (including share of joint 5,228 5,227Squared -
ventures) (US$m)
EBITA (US$m) 619 581Squared 7
EBITA margin (%) 11.8 11.1Squared
Sales volumes (hl 000)
- Lager - excluding contract brewing 43,472 45,629Squared (5)
- Soft drinks 37 54Squared (31)
MillerCoors` volumes (hl 000)
- Lager - excluding contract brewing 42,100 43,099Cubed (2)
- Sales to retailers (STRs) 41,865 42,836Cubed (2)
- Contract brewing 4,558 4,721Cubed (3)
In 2010 before exceptional charges of US$18 million being the group`s share of
MillerCoors` integration and restructuring costs of US$14 million and the
group`s share of the unwind of the fair value inventory adjustment of US$4
million (2009: net exceptional credit of US$325 million being the profit on the
deemed disposal of the Miller business of US$437 million and exceptional costs
of US$28 million in relation to the integration and restructuring costs for
MillerCoors, together with the group`s share of MillerCoors` integration and
restructuring costs of US$33 million, the group`s share of the unwind of the
fair value inventory adjustment of US$13 million and the group`s share of the
impairment of the Sparks brand of US$38 million).
Squared Volumes, group revenue and EBITA represent 100% of Miller Brewing
Company`s performance in the first quarter of the year ended
31 March 2009 and the group`s 58% share of MillerCoors` performance and 100% of
the retained wholly owned Miller Brewing Company business (principally Miller
Brewing International) for the balance of the year ended 31 March 2009.
Cubed MillerCoors pro forma figures are based on results for Miller`s and Coors`
US and Puerto Rico operations reported under International Financial Reporting
Standards (IFRS) and US GAAP respectively for the year ended 31 March 2009.
Adjustments have been made to reflect both companies` comparative data on a
similar basis including amortisation of definite-life intangible assets,
depreciation reflecting revisions to property, plant and equipment values and
the exclusion of exceptional items.
NORTH AMERICA lager volumes for the year (excluding contract brewing) were down
5%. EBITA grew 7% on a reported basis reflecting pro forma EBITA growth of 13%
in MillerCoors, partly offset by lower export sales, adjustments for pro-forma
calculations and additional costs in the North American holding companies.
MILLERCOORS
For the year ended 31 March 2010, MillerCoors STRs declined 2% on a pro forma
basis with continued weak economic conditions affecting the entire industry.
Domestic STWs also declined 2% on a pro forma basis. Despite the challenging
trading environment, EBITA grew 13% on a pro forma basis with firm pricing and
cost management offsetting volume softness.
Premium light brand volumes were down low single-digits with declines in Miller
Lite, and Coors Light partially offset by growth of MGD 64.
MillerCoors` craft and import portfolio grew marginally with growth from Blue
Moon and Peroni Nastro Azzurro, which outperformed a soft import category. The
domestic above premium portfolio, which includes Miller Chill, Sparks and
Killian`s Irish Red, continued to exhibit double-digit decline.
The below premium portfolio was up low single-digits with a decline in
Milwaukee`s Best offset by good growth of Keystone and continued growth of
Miller High Life.
MillerCoors` revenue per hectolitre grew 3% driven by sustained price increases
in the prior year and the second half of the current year.
Cost of goods sold (COGS) per hectolitre were driven up by increases in
commodity costs, with increases in brewing materials (malt and corn), packaging
materials (glass and aluminium), and higher fuel costs. COGS per hectolitre
were also negatively impacted by the absorption of fixed costs across lower
production volumes.
Marketing, general and administrative costs decreased primarily due to the
continued realisation of synergies.
In the year, MillerCoors delivered an incremental US$248 million of synergy
savings, largely through the elimination of duplicate and transitional positions
and specific marketing synergies. Network optimisation savings continued to be
realised from shifting production of Coors and Miller brands within the larger
MillerCoors brewery network. MillerCoors continued to integrate business
processes and systems across the enterprise to improve customer service and
capitalise on the scale of the business. An incremental US$33 million was
delivered from other cost initiatives and projects including efficiencies in
production costs, procurement, and marketing, general and administrative
expenses.
Total annualised synergies and other cost savings now stand at US$409 million,
comprising synergies of US$326 million and other cost savings of US$83 million.
MillerCoors remains on track to deliver US$750 million in total annualised
synergies and other cost savings by the end of the calendar year 2012.
AFRICA
Financial summary 2010 2009 %
Group revenue (including share of 2,716 2,567 6
associates) (US$m)
EBITA (US$m) 565 562 1
EBITA margin (%) 20.8 21.9
Sales volumes (hl 000)
- Lager 13,476 12,726 6
- Lager (organic) 13,443 12,726 6
- Soft drinks 10,442 8,352 25
- Soft drinks (organic) 8,687 8,352 4
- Other alcoholic beverages 3,922 4,079 (4)
In 2010 before net exceptional charges of US$3 million being business
capability programme costs (2009: US$nil).
AFRICA`S volumes continued to grow in a year in which economic growth slowed as
a result of the global economic recession, and which also resulted in weaker
currencies, increased cost of debt and higher inflation. Our multi beverage
portfolio proved resilient, with total organic volumes up 4% including lager
volume growth of 6% and soft drinks growth of 4%. During the year, we acquired
further non-alcoholic beverage businesses in Uganda, Ethiopia and Zambia,
invested in new breweries in Angola, Mozambique, Southern Sudan and Tanzania and
expanded capacity in Uganda and Zambia.
Brand and pack differentiation produced strong growth in the premium category
and further growth in the affordable segment. We made progress in driving
affordability by using local ingredients and supporting enterprise development
through farming initiatives and local sourcing.
Reported EBITA grew 1%, and by 4% in organic, constant currency terms. Margins
declined in the second half to end the year 90 bps below the prior year on an
organic, constant currency basis as the depreciation of some local currencies
increased the cost of imported raw materials. Fixed costs increased with
capacity expansion and supply chain difficulties in Angola negatively impacted
margin. Price increases across the region were generally at or below inflation
levels.
In TANZANIA lager volumes declined 4%, in line with the industry, as a result of
softer consumer spending and adverse weather conditions earlier in the year.
Marketing spend on all brands was increased with a focus on brand innovation.
Ndovu Special Malt and Castle Lite were both launched in the premium segment in
a new 375ml green bottle and volume performance was above initial expectations.
Safari Lager, Redd`s and Castle Milk Stout all benefited from packaging
renovations. Our new brewery in Mbeya was successfully commissioned during the
second half of the year allowing us to reduce distribution costs in the
southwest region. Our arrangement with East African Breweries Limited (EABL) to
brew and distribute their products in Tanzania was terminated in the final
quarter of the year.
MOZAMBIQUE returned to strong growth with lager volumes up 11%. This reflects
improved economic conditions and good growth in the north, aided by the
commissioning of our new brewery in Nampula. Both Laurentina Premium and
Laurentina Preta, a dark lager, grew strongly. The draught category performed
well in the on-premise channel. Profitability growth slowed reflecting
increased import costs driven up by the depreciation of the metical against the
rand.
UGANDA delivered strong lager growth of 24% assisted by newly upgraded capacity
and improved market execution. The launch of the new long neck bottle
invigorated the market and differentiated the Nile Special and Club brands. In
addition, the launch of Nile Gold, a premium malt lager, was well received. In
the final quarter, we completed the acquisition of the Rwenzori water business,
the market leader in bottled water in Uganda.
ZAMBIA lager volumes benefited from the reduction in excise at the beginning of
the financial year, driving growth of 17%. A further excise reduction was
announced in March 2010. The beer portfolio was expanded with the launch of the
local premium brand Mosi Gold in December 2009. Soft drinks volumes grew 1% on
an organic basis. The maheu business (a non-alcoholic traditional beverage),
acquired in September 2009, performed well, growing our non-alcoholic brand
portfolio and driving soft drinks volumes up 28% on a reported basis. EBITA
margin was impacted by unfavourable exchange rates as a result of the weak
kwacha, which drove up the cost of imported raw materials.
In ANGOLA, in a very challenging year, soft drinks volumes ended 5% below the
prior year, while lager volumes grew 5%. After years of strong economic growth,
Angola experienced negative GDP growth following a significant drop in oil
revenue. During the year, the kwanza was de-linked from the US dollar resulting
in a 15% depreciation and the imposition of severe currency restrictions. These
factors negatively impacted consumer spending. Capacity constraints,
exacerbated by difficult logistics, hampered production whilst the cost of
imported raw materials was adversely affected by the currency depreciation. A
new two million hectolitre soft drinks plant was commissioned in January 2010
and the new brewery in Luanda was commissioned in April 2010.
In BOTSWANA, the sale of alcoholic products continued to be adversely affected
by difficult economic conditions, the social levy introduced in November 2008
and restricted trading and drinking hours. Our lager volumes ended the year 35%
below the prior year. Soft drinks volumes grew by 9% driven by increased
returnable bottle sales, enhanced marketing and improved trade execution.
CASTEL delivered increased profits with lager volumes growing 11% supported by
new capacity in Angola and good growth in Cameroon, Ethiopia and the Republic of
Congo. Soft drinks volumes also grew 11% with good growth in Algeria, Tunisia
and Cameroon.
ASIA
Financial summary 2010 2009 %
Group revenue (including share of
associates
and joint ventures) (US$m) 1,741 1,565 11
EBITA (US$m) 71 80 (12)
EBITA margin (%) 4.1 5.1
Sales volumes (hl 000)
- Lager 46,279 41,714 11
- Lager (organic) 44,815 41,714 7
ASIA`s lager volumes grew 7% on an organic basis, with good growth in China,
Australia and Vietnam partly offset by volume decline in India due to regulatory
issues. Full year EBITA was level on an organic constant currency basis with
good underlying growth in China offset by difficult trading conditions in India.
Reported EBITA, which includes initial losses in recent Chinese start-ups and
acquisitions, declined 12%.
In CHINA lager volumes grew 10% on an organic basis and 13% on a reported basis
despite a slow-down in growth over the last quarter of the year. Additional
capacity of some 20 million hectolitres was added during the year including the
acquisition of three new breweries and the commissioning of four greenfield
breweries across both existing and new markets. Marketing efforts remained
focused on the Snow brand, which is now approaching 90% of volumes, particularly
behind the Snow Draft and Brave the World variants in the fast growing premium
segment. CR Snow`s market share continued to grow and is estimated to exceed
20%.
The central region contributed half of the volume growth with reported volumes
up 16% driven primarily by growth in the key provinces of Anhui and Zhejiang and
new operations in Shandong and Shanghai. The north eastern region delivered
strong volume growth as CR Snow gained share in the Jilin and Heilongjiang
areas. Good growth continued in the western region, particularly in the
provinces of Guizhou and Gansu and a return to growth in Sichuan.
Volumes in INDIA were down 14% and EBITA declined significantly reflecting
regulatory disputes in Andhra Pradesh and Uttar Pradesh, and excise increases in
Karnataka and Rajasthan. Trading conditions improved in the last quarter as
regulatory issues eased and price increases were implemented in the key states
of Andhra Pradesh, Karnataka and Maharashtra. During the year we introduced an
embossed proprietary bottle which will improve package presentation and drive
down costs.
In VIETNAM, which is reported as a subsidiary for the first time, Miller High
Life was launched to supplement the local Zorok brand resulting in a marked
increase in volumes. The Zorok brand is gaining acceptance regionally and a
sustainable export business has been created.
In AUSTRALIA, our portfolio of premium brands again delivered strong growth with
lager volumes up 32%. Peroni Nastro Azzurro continues to take share in the
premium segment and was supplemented during the year by Peroni Leggera, a low
carbohydrate variant. Bluetongue and Miller Genuine Draft continued to perform
well. Our greenfield brewery north of Sydney is on track to be commissioned in
June 2010, and local production will result in lower product costs.
SOUTH AFRICA: Beverages
Financial summary 2010 2009 %
Group revenue (including share of 4,777 3,955 21
associates) (US$m)
EBITA (US$m) 885 764 16
EBITA margin (%) 18.5 19.3
Sales volumes (hl 000)
- Lager 25,761 25,949 (1)
- Soft drinks 17,044 17,303 (1)
- Other alcoholic beverages 1,404 1,325 6
In 2010 before net exceptional charges of US$53 million being business
capability programme costs of US$42 million and costs associated with the
establishment of the broad-based black economic empowerment transaction of US$11
million (2009: US$nil).
The economic environment in South Africa remained challenging throughout the
year with declining consumer demand, despite a return to GDP growth during the
last quarter of calendar 2009.
Lager volumes declined by 1% for the year with 1% growth during the second half
peak offsetting a 3% decline during the first six months. The beer market grew
marginally during the year, and growth increased towards the end of the year,
benefiting somewhat from stock build up ahead of the Easter 2010 peak.
Soft drinks volumes declined 1% reflecting the difficult economic environment
and the unseasonably cold and wet weather during the summer peak. Sparkling
soft drinks sales were down 1% with increased consumption in PET packs offset by
a decline in can volumes. The impact of a seven-week strike, which took place
over the peak Christmas period, was mitigated by thorough contingency planning.
Revenue grew by 6% and revenue per hectolitre grew by 7% on a constant currency
basis driven by price increases in line with inflation in both beer and soft
drinks. Raw material costs remained under pressure as medium-term contractual
arrangements with key brewing raw material suppliers limited our ability to
benefit from the downturn in brewing commodity prices. Higher packaging
materials and sugar prices also contributed to increased input costs.
Organic, constant currency EBITA grew by 2%, but was up 16% on a reported basis
reflecting the strengthening of the rand over the year, relative to the US
dollar. Margins showed a modest decline with a fall in volumes, higher input
costs and greater investment in market-facing activities partly offset by price
increases and cost productivity. A continued focus on reducing non-market-
facing and distribution costs delivered savings of almost US$80 million during
the year. These savings were redirected into market-facing investments.
Much of the increase in marketing support was directed into our core power
brands; Carling Black Label, Hansa Pilsener and Castle Lager in the mainstream
segment and Castle Lite in the premium segment. Both Hansa Pilsener and Castle
Lager delivered high single-digit growth. Castle Lite, which already accounts
for one in every three premium beers purchased in South Africa, returned to
growth and is now performing strongly.
In the premium segment, we continued to establish our international premium
portfolio with the focused development of Miller Genuine Draft, Peroni Nastro
Azzurro and Grolsch.
During the year, we upgraded sales capability and customer service offerings to
retailers in all classes of trade, which resulted in both the number of outlets
serviced and the intensity of servicing increasing substantially.
The broad based black economic empowerment transaction that was announced during
the year, will benefit employees, soft drinks and liquor retailers and the wider
South African community by placing 8.45% of the equity of The South African
Breweries Limited under black ownership. The retail offer closed on 28 April
2010 and the transaction will be completed in June 2010.
DISTELL`s international and domestic sales continued to exhibit good performance
with strong sales of cider and ready-to-drink brands offsetting declines in
spirits and wine. Despite higher volumes, profitability declined due to
unfavourable sales mix and adverse transactional currency.
SOUTH AFRICA: Hotels and Gaming
Financial summary 2010 2009 %
Group revenue (share of associate) (US$m) 406 348 17
EBITA (US$m) 122 122 1
EBITA margin (%) 30.0 34.9
Revenue per available room (Revpar) - US$ 65.33 67.36 (3)
In 2009 before exceptional charges of US$7 million being the group`s share of
fair value mark to market losses on financial instruments.
SABMiller is a 49% shareholder of the Tsogo Sun group.
The South African hotel industry remained subdued during the year with lower
levels of corporate and government spending. A number of major sporting events
in South Africa during the first quarter of the year provided some uplift, but
occupancies remained depressed overall.
Our share of Tsogo Sun`s reported revenue was US$406 million, an increase of 17%
on a reported basis including the non-organic share of revenue of Tsogo Sun`s
associated company Gold Reef Resorts and the newly acquired Century Casinos
business. Excluding this incremental revenue, revenue decreased 4% against the
prior year at constant currency. Constant currency revenue per available room
(revpar) declined 15%, and was down 3% at reported rates reflecting the stronger
rand relative to the US dollar.
The gaming industry in South Africa contracted during the year with weak demand
affecting casino win, although the KwaZulu-Natal region demonstrated resilience.
Gauteng, the most significant gaming province, reported a 3% drop in market
size.
Despite the tough trading conditions, the Tsogo Sun Group concluded a number of
transactions during the year, positioning itself well to benefit from market
recovery in the future. On 30 June 2009, Tsogo Sun acquired 100% of the Century
Casinos business in Caledon and Newcastle, and in October 2009 increased its
stake in the Suncoast Casino in Durban by an additional 30%.
In February 2010, SABMiller announced its intention to merge the Tsogo Sun Group
with Gold Reef Resorts Limited, a Johannesburg Stock Exchange listed business,
through an all share reverse listing, which will result in SABMiller holding
39.7% of the listed merged entity. The newly merged company is expected to be
one of the top 10 listed Gaming and Hotel companies in the world. The
transaction was approved by Gold Reef Resort`s shareholders in April 2010 but
completion is still subject to the necessary regulatory and other approvals.
FINANCIAL REVIEW
NEW ACCOUNTING STANDARDS AND RESTATEMENTS
The accounting policies followed are the same as those published within the
Annual Report and Accounts for the year ended 31 March 2009 as amended for the
changes set out in note 1, which had no material impact on the group`s results.
The consolidated balance sheet as at 31 March 2009 has been restated for further
adjustments relating to initial accounting for business combinations, further
details of which are provided in note 12. The Annual Report and Accounts for
the year ended 31 March 2009 are available on the company`s website:
www.sabmiller.com.
SEGMENTAL ANALYSIS
The group`s operating results on a segmental basis are set out in the segmental
analysis of operations. The group has adopted IFRS 8, `Operating Segments`,
with effect from 1 April 2009 and this has resulted in a change to the segmental
information reported, with Africa and Asia now reported as separate segments.
Comparative information has been restated accordingly. Additional historical
information for each of the Africa and Asia segments is available on the
company`s website.
SABMiller uses group revenue and EBITA (as defined in the financial definitions
section) to evaluate performance and believes these measures provide
stakeholders with additional information on trends and allow for greater
comparability between segments. Segmental performance is reported after the
specific apportionment of attributable head office costs.
DISCLOSURE OF VOLUMES
In the determination and disclosure of sales volumes, the group aggregates 100%
of the volumes of all consolidated subsidiaries and its equity accounted
percentage of all associates` and joint ventures` volumes. Contract brewing
volumes are excluded from volumes although revenue from contract brewing is
included within group revenue. Volumes exclude intra-group sales volumes. This
measure of volumes is used in the segmental analyses as it closely aligns with
the consolidated group revenue and EBITA disclosures. See the financial
definitions section for the definition of aggregated volumes.
Organic, constant currency comparisons
The group discloses certain results on an organic, constant currency basis, to
show the effects of acquisitions net of disposals and changes in exchange rates
on the group`s results. See the financial definitions section for the
definition.
In relation to the MillerCoors joint venture no adjustments have been made in
the calculation of organic results as the group`s share of the joint venture is
deemed to be comparable with 100% of the Miller business prior to the creation
of the joint venture.
BUSINESS COMBINATIONS AND ACQUISITIONS
On 10 April 2009 the g
