SABMiller Strengthens Chinese Position

25/07/06 China Resources Snow Breweries Limited, an associate of SABMiller plc and a subsidiary of China Resources Enterprise, Limited has announced that it has agreed to acquire a 100% equity interest in Zhejiang Yinyan Brewery Company Limited or for US$42.3 million. In addition, CR Snow will acquire the brewing related assets of the Anhui Huaibei Xiangwang Brewery Company Limited for a consideration of US$10.1 million.
 
Situated in the Haiyan county of Zhejiang Province on the east coast of China, the Yinyan Brewery is well positioned to further extend CR Snow's footprint in northern Zhejiang, an area which is close to a number of major cities including Shanghai, Hangzhou, Suzhou and Ningbo.  Similarly, Xiangwang Brewery is based in Huaibei, a major city in northern Anhui. Upon acquisition, its national brand  "SNOW" will be produced as soon as practicable. At present, CR Snow has two breweries in Zhejiang Province and five breweries in Anhui Province, with 2005 sales volumes of 2.9 million hectolitres and 4.9 million hectolitres respectively. Both breweries are strategic acquisitions in the development of CR Snow's footprint in China.
 
Incorporating Yinyan Brewery's net debt of US$6 million and CR Snow's intention to invest an additional US$1.8 million, the total investment cost in Yinyan Brewery is expected to be approximately US$50.2 million.  The current annual production capacity of the brewery is 1.8 million hectolitres and this will be increased to 2.4 million hectolitres after undergoing the planned investment.

At present, the portfolio is focused on the "Yinyan" series of beers, which are distributed in the Jiaxing area of Zhejiang; and in Shanghai.  In 2005 the Yinyan Brewery sold approximately 1 million hectolitres of beer. The consideration for the acquisition of Xiangwang Brewery is based on appraised asset value, with an intended further investment of US$7.4 million, bringing total investment cost to approximately US$17.4 million.  The annual production capacity of the brewery will be upgraded from 930,000 hectolitres to 1.6 million hectolitres.

At present, the brewery's main brand "Xiangwang", has a dominant market share in Huaibei and in 2005 the brewery reported sales volume of about 650,000 hectolitres.
 
Mr. Andre Parker, Managing Director of SABMiller Africa & Asia, said, "We have a profitable and growing presence in Zheijiang and Anhui. Therefore these acquisitions will not only effectively reinforce CR Snow's market position in these provinces, but provide a larger platform to expand our national brand SNOW in these strong growth areas."
 
Mr. Mark Chen, Managing Director of China Resources Enterprise, Limited said, "The two acquisitions play a crucial role in the strategic development of CR Snow in these areas. Yinyan Brewery will generate synergies with our existing breweries at Qianjiang and Xiling, cementing a strong network in the northern region of Zhejiang Province. It will also provide us direct access to the Shanghai market given its proximity to the city.  Whilst at the same time, acquisition of Xiangwang Brewery will establish CR Snow's production base in northern Anhui and add to our dominant market position in the province."