SABMiller Records Good Growth Despite Difficult Environment
Prior year volume growth and weakening consumer demand in certain markets presented a challenging start to the year. This performance demonstrates the advantage of our diversified global footprint, the strength of our brands and operational capability.
14/11/08 SABMiller plc, one of the world's leading brewers with operations and distribution agreements across six continents, reports its interim (unaudited) results for the six months to 30 September 2008.
Operational Highlights
* Lager volumes up 3%, with organic volumes slightly ahead of the high prior year base
* Organic constant currency revenue growth of 10%, with leading brands enabling firm pricing
* Reported EBITA up 9%; up 2% on an organic constant currency basis
* Conditions and performance varied across business segments:
- Latin America performance mixed; EBITA flat
- Europe organic lager volume growth of 2% on very high comparables; share gains in Poland and Romania; EBITA down 6%
- North America EBITA up 18%, MillerCoors' integration on track
- Africa and Asia EBITA up 7%; Africa lager volume growth remains strong at 11%; firm pricing in China
- South Africa lager volumes down 1%; mix shifting towards mainstream
Graham Mackay, Chief Executive of SABMiller, said:
"Exceptional prior year volume growth and weakening consumer demand in certain markets presented a challenging start to the year. However, we have continued to drive revenue growth and offset higher input costs through firm pricing while protecting volumes and increasing share in some key markets. This performance demonstrates the advantage of our diversified global footprint, the strength of our brands and operational capability. Our North American joint venture, MillerCoors, has made a promising start and is on track to deliver US$500 million per annum of cost savings by the third year of combined operations."
Business review
The first half year results reflect the high comparable growth rates achieved in the same period last year and the moderation of consumer demand in many of SABMiller’s markets. However, across the group’s diversified global footprint there were areas of good growth, driven by enhanced operational execution and investment in brands. Pricing was generally strong contributing to revenue growth of 10% on an organic constant currency basis.
* The emphasis across the Latin America region on raising the appeal of the beer category continued to yield results, with the group’s share of the alcohol market in the region increasing steadily as investment in new packaging, coupled with improvements to sales and distribution infrastructure, gained traction. However, the on-going impact of higher lending rates on consumer confidence in Colombia has slowed volume growth. Earnings have been impacted by commodity cost pressures, competition in Peru and increased depreciation following our significant capital investment programme.
* In Europe, performance was subdued following several years of strong growth in volume and profit. Total organic lager volumes grew by 2% but EBITA declined by 6% on an organic constant currency basis reflecting a mixed picture across the region. Poorer weather, high distributor stocks and stronger pricing constrained volume growth in most markets, particularly Russia and the Czech Republic. Volumes in Romania and the UK grew strongly. We have led industry pricing higher in most markets and our revenue per hectolitre was up 6% on an organic constant currency basis, but significant rises in input costs, general cost inflation, higher investment and depreciation impacted margins.
* The North America segment delivered a strong performance with EBITA up 18% in the first half with a good contribution from Miller Brewing Company in the first quarter and pleasing initial results from MillerCoors following its inception on 1 July 2008. On a pro forma1 basis, MillerCoors’ US sales to retailers (STRs) rose by 0.7% over the three months to September after adjusting for an extra trading day. Net revenue per barrel rose by 3% driven by robust growth of the Coors Light brand and a good performance from the craft and import portfolios incorporating Blue Moon, Leinenkugels and Peroni Nastro Azzurro. MillerCoors is implementing its integration strategy across the business and is confident of delivering its stated goal of achieving US$500 million per annum of cost synergies by the third year of combined operations.
* Lager volumes in Africa increased by 11% in markets that have so far been largely unaffected by the global financial conditions. Angola, Botswana, Zambia, Tanzania and Mozambique all reported good volume growth as their economies continued to expand and sales execution was improved. Traditional beer saw record organic volume growth of 35%, owing to good performances in Zambia, Malawi and Botswana. In China, volume growth was ahead of the market as our associate, CR Snow, recovered from a slow start to the year following the earthquake in Sichuan and higher pricing. In India, overall market share declined and in Australia our new venture is performing ahead of expectations.
* Lager volumes in South Africa were down 1% against the prior year in which the group had less competition in the premium segment. Consumers continued to feel the effects of higher food and fuel prices. Two price increases and growth in the mainstream segment from brands such as Hansa Pilsener and Castle Lager, have partially offset slower premium sales and the adverse mix effects. However, continuing rises in raw material and distribution costs, an increase in depreciation as well as some losses on raw material forward exchange contracts contributed to a decline in EBITA margin of 360 basis points. The company’s premium brand portfolio was enhanced by the successful launch of new brands into the market. Soft drinks volumes grew 2%.
Aggregated beverage volumes were 191 million hectolitres (hl). Aggregated reported lager volumes were up 9% to 159 million hl including acquisitions in the Netherlands and China. Reported EBITA of US$2,225 million was up by 9% and included a benefit of 7% from favourable weighted average currency exchange rates. The group EBITA margin decreased to 15.6%, 130 basis points below the prior year, reflecting higher commodity costs and investment across the group. The capital investment programme continued, increasing capacity and operational efficiency with brewery expansions in Poland and Romania and the ongoing construction of new breweries in Russia, Angola and Mozambique. Net cash generated from operations before working capital movements (EBITDA) was 5.6% above the prior year, supporting the continued capital investment. The group’s gearing increased during the period to 53.6% from 49.7% at year end. Adjusted earnings and adjusted earnings per share are up by 9%, to US$1,128 million and 75.2 US cents respectively for the first six month period. An interim dividend of 16 US cents per share will be paid to shareholders on 5 December 2008.
