SAB - SABMiller Plc - Interim Announcement
Thu, 13 Nov 2008
SAB
SOSAB
SAB - SABMiller Plc - Interim Announcement
SABMiller Plc
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
INTERIM ANNOUNCEMENT
13 November 2008
GOOD GROWTH ACHIEVED DESPITE DIFFICULT ENVIRONMENT
SABMiller plc, one of the world`s leading brewers with operations and
distribution agreements across six continents, today reports its interim
(unaudited) results for the six months to 30 September 2008.
OPERATIONAL HIGHLIGHTS
- Lager volumes up 3%(1), 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(2) flat
- Europe organic lager volume growth of 2% on very high comparables; share
gains in Poland and Romania; EBITA(2) down 6%
- North America EBITA(2) up 18%, MillerCoors` integration on track
- Africa and Asia EBITA(2) up 7%; Africa lager volume growth remains
strong at 11%; firm pricing in China
- South Africa lager volumes down 1%; mix shifting towards mainstream
(1) Following the inception of the MillerCoors joint venture the group has
revised its volume definitions. Further details of these revised
definitions can be found in the Financial review on page 15.
(2) EBITA growth is shown on an organic constant currency basis.
Sept Sept March
2008 2007 2008
US$m US$m % change US$m
Revenue (a) 11,166 10,781 4 21,410
EBITA (b) 2,225 2,036 9 4,141
Adjusted profit before tax 1,860 1,773 5 3,639
(c)
Profit before tax 2,020
1,579 28 3,264
Adjusted earnings (d) 1,128 1,036 9 2,147
Adjusted earnings per share
(d)
- US cents 75.2 69.1 9 143.1
- UK pence 38.9 34.5 13 71.2
- SA cents 585.8 492.0 19 1,021.2
Basic earnings per share 94.8 63.9 48 134.9
(US cents)
Interim dividend per share 16.0 16.0 -
(US cents)
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."
a) Revenue excludes the attributable share of associates` and joint
ventures` revenue of US$3,056 million (2007: US$1,242 million).
b) 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 the interim announcement.
c) Adjusted profit before tax comprises EBITA less adjusted net finance
costs of US$358 million (2007: US$258 million) and share of associates`
and joint ventures` net finance costs of US$7 million (2007: US$5
million).
d) A reconciliation of adjusted earnings to the statutory measure of profit
attributable to equity shareholders is provided in note 5.
September Organic,
constant
2008 Reported currency
Segmental EBITA performance EBITA growth growth
US$m % %
Latin America 474 8 -
Europe 725 16 (6)
North America 355 18 18
Africa and Asia 311 12 7
South Africa: Beverages 332 (18) (10)
South Africa: Hotels and Gaming 61 3 13
Corporate (33) - -
Group 2,225 9 2
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.
- 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
quarter ended 30 September 2007. 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.
- 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.
OUTLOOK
We have achieved good growth over the period despite a difficult environment,
with underlying performance enhanced by beneficial currency movements. The
deterioration in global economic conditions is causing weakening consumer
demand in many of our markets. Cost pressures will continue and the strength
of the US dollar relative to the group`s major
currencies is expected to
adversely affect reported results.
Our diversified geographical footprint and strong portfolio of brands puts us
in a strong competitive position. We are reviewing spending and investment
plans in the light of the current uncertain environment but, given our sound
financial position, we will continue to invest selectively to support future
growth.
Enquiries:
SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Corporate Affairs Mob: +44 7850 285471
Gary Leibowitz Senior Vice President, Mob: +44 7717 428540
Investor Relations
Nigel Fairbrass Head of Media Relations Mob: +44 7799 894265
A live audiocast of the management presentation to analysts will begin at
9.30am (GMT) on 13 November 2008.
This announcement, a copy of the slide presentation and video interviews with
management are available on the SABMiller plc website at www.sabmiller.com.
Video interviews with management can also be found at www.cantos.com.
High resolution images are available for the media to view and download free
of charge from www.newscast.co.uk.
Copies of the press release and detailed Interim Announcement are available
from the Company Secretary at the Registered Office, or from
2 Jan Smuts Avenue, Johannesburg, South Africa.
Registered office:
SABMiller House, Church Street West, Woking, Surrey GU21
6HS
Incorporated in England and Wales (Registration Number 3528416)
Telephone: +44 1483 264000
Telefax: +44 1483 264117
OPERATIONAL REVIEW
Following the inception of the MillerCoors joint venture the group has
revised its volume definitions. Further details can be found in the
Financial review on page 15. All current and prior period volume figures and
growth rates in the following operational reviews are presented under the new
volume definition.
LATIN AMERICA
Sept Sept
Financial summary 2008 2007 %
Group revenue (including share of 2,848 2,453 16
associates) (US$m)
EBITA* (US$m) 474 438 8
EBITA margin (%) 16.6 17.8
Sales volumes** (hl 000)
- Lager 18,260 17,757 3
- Soft drinks 9,467 9,144 4
- Soft drinks (organic) 9,467 9,058 5
*In 2008 before exceptional items of US$Nil million (2007: US$52 million
being integration and restructuring costs in Latin America of US$69 million
less the net profit on the sale of the soft drinks and juice businesses in
Costa Rica and Colombia of
US$17 million respectively).
**Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
The region faced a number of challenges in the first half of the year, most
notably in Colombia, and underlying EBITA performance in the period was
muted. The region delivered EBITA growth of 8% aided by favourable exchange
rates but on an organic constant currency basis EBITA was flat. Revenue per
hl on an organic constant currency basis increased by 7% but margins have
been impacted by aggressive competition in the economy segment in Peru,
increased commodity costs and higher depreciation as a result of the capital
investment programme. Fixed cost productivity across the region has been a
major area of focus and has partially mitigated the impact of these margin
pressures. The region continues to build
differentiated portfolios and raise
the appeal of the beer category through activities such as the recent Club
Premium launch in Ecuador, the small pack innovation in Colombia and the
focus on the premium Cusquena brand in Peru. At the same time increased
attention is being focused on execution at the point of sale and revenue
enhancement.
Lager volumes in COLOMBIA decreased 3% against high comparatives and as a
result of pressures on discretionary disposable income from high interest
rates and increasing inflation. However, our share of the alcohol market has
increased steadily over the period and stood at 67% at the end of September,
a gain of 130 basis points over the prior year. Revenue growth benefited from
an 8% price increase late last year and we have executed another price
increase of 9% in October. There has been some displacement of volume
from
Aguila to Poker in the mainstream segment but the volume of our worthmore
brands Club Colombia and Redd`s grew sharply. The first half has seen the
launch of a new Aguila pack in the Pacific region, a 225ml returnable bottle,
with initial volumes exceeding expectations. In the current environment,
increased focus has been placed on operational efficiencies and improving
service, and together with the benefit of pricing these measures resulted in
an improvement in EBITA margin. In line with the company`s strategy to focus
on the brewing and distribution only of beer and malted beverages, the first
half saw the company announce the disposal of its water brand, Brisa, for a
cash consideration of approximately US$90m. This transaction is expected to
be completed by the end of the financial year.
IN PERU volume growth has been robust in a highly competitive environment.
Lager volumes
grew 10% with a particularly strong second quarter. Competition
remains fierce with our two major competitors continuing to discount heavily
and launch new brands, at low price points. During the first part of the
year, with multiple brand launches and competitive activity, the economy
segment grew to 30% of the market. We have been able to gain and hold clear
leadership in this rapidly growing segment with the Pilsen Trujillo brand,
despite selective price increases. In recent months the growth of the segment
has been contained and its share has fallen to 25%. Our overall market share
has stabilised since January and is currently 85%. Sales mix has been helped
by market share gains in our worthmore portfolio with the Cusquena brand
commanding a greater than 8% share. Overall revenue per hl was flat in
constant currency and margins were negatively impacted by commodity cost
pressures. Much work has been done on the
portfolio strategy and market
mapping in Peru; new opportunities have been identified and are now being
actively pursued.
In ECUADOR the first half of the year saw management continue to focus on
building momentum through brand renovation and changes to the sales and
distribution processes as well as substantial cooler investment. These
initiatives were backed up by ongoing efforts aimed at achieving uniform
pricing to the consumer across the country. These strategies have reaped
rewards with lager volume growth of 14%. Outstanding growth was achieved by
our local worthmore brand, Club Premium, driven not only by innovative
marketing activation, but also more recently by the launch of the 550ml
returnable bottle. Our flagship mainstream brand Pilsener continued to
perform well following its renovation last year, growing at over 14%.
New
tank capacity has been installed at the Guayaquil plant and the modernisation
of the Quito brewery is underway.
In PANAMA the re-launch of our mainstream brand Atlas has met with mixed
reaction in the market and this together with heavy discounting by our
competitors has affected brand volumes. However, the re-launch of our brand
Balboa has been successful with the brand growing strongly whilst growth of
worthmore brands has been achieved, albeit off a low base. Soft drinks have
performed well with growth of 10%.
Total volumes in HONDURAS grew by 7%, with growth in both lager and soft
drinks. Lager volumes grew by 6% driven by worthmore volumes with notable
performances from Barena and Miller brands, positively impacting mix. In June
a price increase averaging 8% was implemented. Increased cooler investment in
the trade, beer
outlet penetration and third party sales support have also
assisted volume growth. Soft drinks volume growth was good at 8%, driven by
the company owned brand Tropical which grew at over 15%. This has resulted in
further market share gains with our share up 50 basis points on a 12 month
moving annual basis. However volumes are being affected by a slowdown in the
country`s economy with lower remittances from the USA and increased inflation
affecting disposable income. Soft drinks price increases were also
implemented on our main returnable glass pack (12 oz) as well as family PET
packs (2.5l and 3.0l).
With tough trading conditions across all sectors in EL SALVADOR, the first
half saw a decline of total volume of 1%, with soft domestic volumes
partially offset by growing export sales, while soft drinks growth in the
local market was subdued. High fuel and
commodity prices, a slowing of
remittances from the USA and continued political uncertainty have combined to
soften growth. We continue to lead the soft drinks category with a 51% share,
a good increase over the prior year.
EUROPE
Sept Sept
Financial summary 2008 2007 %
Group revenue (including share of 4,010 2,876 39
associates) (US$m)
EBITA* (US$m) 725 622 16
EBITA margin (%) 18.1 21.6
Sales volumes** (hl 000)
- Lager 28,285 25,715 10
- Lager organic
26,219 25,715 2
* In 2008 before net exceptional costs of US$10 million (2007: US$Nil) being
the unwind of fair value adjustments on inventory following the acquisition
of Grolsch.
**Volume figures have been restated for the prior period following the
revision of the group`s volume definitions (see page 15).
EUROPE`S performance was subdued on an organic constant currency basis
following several years of strong growth in volume and profits. Total lager
volume growth was 10% while organic growth was 2%. The half year cycled a
strong comparative period when volumes grew 12% organically. Poorer weather,
high distributor stocks and increased industry pricing constrained volume
growth in most countries, particularly Russia and the Czech Republic, while
in Romania and the UK volumes grew strongly.
Significant increases in input
costs particularly barley, malt and hops impacted margins. We have led
industry prices higher in most markets and our revenue per hl was up 6% on an
organic basis. Reported EBITA increased 16% benefiting from earlier strength
in eastern European currencies and the acquisition of Grolsch, while organic
constant currency EBITA declined 6%, as input cost pressures, general cost
inflation, increased investment and depreciation all impacted margin.
In POLAND, our domestic organic lager volumes were up 4% with all brands
ahead of market growth. Consumer demand slowed sharply in the second quarter
with total retail sales expanding at less than half the prior year`s rate.
This, together with a cooler summer, saw industry beer volumes for the first
half grow 1% compared with 8% in the prior period. Tyskie, the country`s
leading brand with a 16% share, achieved 5% growth assisted by a
complete
renovation of its packaging and strong marketing centred on the Euro 2008
soccer championships and the Olympic Games. Premium brand Lech was also up 5%
with non-alcoholic variant Lech Free benefiting from the introduction of a
new sleek can, as did premium brand Redd`s, up 17%. Zubr was up 3% with the
introduction of new multi-packs. Our overall organic market share increased
190 basis points to 42%. The integration of Browar Belgia is complete and the
Wojak brand has recently been relaunched. In April, we increased prices by an
average of 4% which assisted in offsetting brewing raw material cost
increases. Capital expenditure is focused on completing the Tychy and Poznan
brewery expansions.
In the CZECH REPUBLIC, the beer industry has experienced a wave of
consolidation. We remain market leader, pursuing value rather than volume in
a market
which declined 4% and our market share decreased marginally. However
revenue per hl is up 6%, reflecting our price increase in November 2007.
Noteworthy brand performances came from Kozel up 8% following its crate
upgrade and non-alcoholic Radegast Birell, up 14%, while mainstream Gambrinus
declined by 10%. This decline, mainly in the on-premise channel, is being
addressed with increased focus on higher value outlets. The iconic Pilsner
Urquell brand showed a small decline, mainly reflecting lower tourism in
Prague with the poorer summer weather and strong Czech currency.
Significantly higher commodity costs (barley, hops and fuel) impacted
margins. Capital expenditure has been directed at improving the export
capability at the Plzen brewery.
In ROMANIA, our volumes were up an encouraging 24% and our market share
improved by more than 3%. The beer
industry grew 5% as consumer disposable
income has improved through real wage increases, access to credit and overall
economic growth. This excellent performance was supported by our full brand
portfolio, focused line extensions, much expanded off-premise channel
visibility and increased PET packaging availability. The key driver was a
31% growth in Timisoreana to reach 14% market share, with Ciucas up 19%
mainly through growth of its two litre PET package. In the premium segment,
Peroni Nastro Azzurro doubled its volume, Ursus was up 5% and Redd`s far
exceeded our expectations. Average selling prices have been increased by 8%,
which is ahead of consumer price inflation. Brewing capacity is being
expanded to 7 million hl.
In RUSSIA, the beer market slowed, with production statistics showing 3%
growth (prior year 14%). The market has been affected by a
number of factors
including poor weather, sustained high inflation and, more recently, sharply
deteriorating economic conditions. Moscow and its surrounding region posted a
9% decline, according to AC Nielsen, while other regions showed some growth.
Our sales to retailers (STRs) showed small growth resulting in a 40 basis
point national market share gain to 6% but some share has been lost in the
premium segment because of our weight in the large Moscow premium market. The
beverage distribution channel generally has started to respond to the softer
market conditions and reduce wholesaler stocks, a trend that will continue
into the second half of the year. As a result, our sales to wholesalers
(STWs) have reduced in the first half by 4%. Zolotaya Botchka was down 8% and
Miller Genuine Draft (MGD) was down 20%. Pilsner Urquell, Redd`s and Holsten
all showed good growth driven by packaging innovation, key account
initiatives and regional distribution gains. Revenue per hl is up 12%
