SABMiller’s profit floats higher on strong volume growth
Business Report - May 20th 2011, 10:24
SABMiller’s South African subsidiary, SAB, posted strong results in the year to March as both lager and soft drink volumes increased and a new business strategy launched in 2009 gained traction.
The company reported yesterday that revenue increased by 17 percent (8 percent on a constant currency basis) to $5.6 billion (R38.8bn).
SAB reports in dollars in line with the group. Revenue growth was driven largely by strong volume growth and improved price management in the beer and soft drinks businesses.
Earnings before interest, tax and amortisation (Ebita) grew 21 percent (11 percent on a constant currency basis) to $1.1bn.
The group also reported the first full-year dividend of R94.4 million for Zenzele, its black empowerment scheme, which introduced almost 40 000 new shareholders and brought black ownership to 8.45 percent.
Lager volumes grew 2 percent to 26.3 million hectolitres and soft drinks volumes increased 3 percent to 17.6 million hectolitres.
SAB’s operations include its beer business, soft drinks division ABI, Appletiser and a 29 percent stake in Distell.
Norman Adami, the chairman and managing director of SAB, said yesterday that the strategy to deal with intense competition was paying off with growth in market share.
In particular the business faced significant headwinds as a result of Heineken withdrawing Amstel from SAB, which had sold the beer under licence, and the relaunching through a joint venture with Namibian Breweries and Diageo.
Adami said SAB’s strategy was aimed at moving from an operationally orientated sole supplier to a business that nurtured and supported brands and retailers. The strategy included restructuring the cost base, which resulted in R1bn in savings and an incremental R1.4bn invested in market facing activities.
Chris Gilmour, an equity analyst at Absa Investments, said for SAB to be up 11 percent was “pretty impressive” for an operation that was supposed to be taking a lot of strain from the upheaval of losing Amstel and the relaunch of it as a competitor to Black Label, Castle and Hansa.
Gilmour said the real success for SAB had been Castle Lite, which now has about a 6.5 percent market share. Amstel has a 6.2 percent market share from 9.2 percent a few years ago.
“SAB has done with Castle Lite what it did with Amstel in the 1960s and 1970s. That is (they have) taken an ordinary beer and turned it into the most successful premium brand. It’s a formidable achievement considering Amstel is a decades old brand and Castle Lite is a relatively young brand,” Gilmour said.
SAB said Castle Lite achieved an annual moving growth rate of 25 percent to become the largest and fastest-growing premium brand in South Africa.
Adami said soft drinks presented the biggest opportunity for growth due in part to the growth of the middle class. But the biggest barrier was the lack of activated points of sale. SAB has increased penetration from 29 000 outlets to 70 000 and expects to lift that to 200 000 outlets over the next three years.
ABI added 10 percent new PET bottle capacity in 2010 with plans to add another 25 percent during 2011. Investments in cold drinks fridges will double over the next five years and ABI will increase its employee complement in critical areas, having added more than 100 sales representatives last year.
SABMiller added 0.4 percent to close at R253.59 yesterday.
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