During the past year we have clearly positioned SABMiller as
a leader in the global beer market. The acquisition of Miller
Brewing Company and, more recently, transactions with Birra
Peroni and Shaw Wallace demonstrate the considerable financial
strength of the group as it continues to expand. We have achieved
organic sales growth and productivity improvements across many
of our markets, and added to our established positions with
a number of smaller acquisitions in Europe and Africa &
Total group beverage volumes of 151.4 million hectolitres (hls)
were 52% above last year's 99.4 million hls (organic growth
3%). Lager volumes were up 65% to 115.8 million hls, with
organic growth of 4.2%. Beer South Africa recorded a second
consecutive year of growth, with volumes up 0.8% to 24.4 million
Other beverages totalled 35.6 million hls.
Our widespread portfolio of businesses delivered an impressive
financial performance over the year. Turnover, including share
of associates, more than doubled to US$9,112 million (organic
growth 17.8%). EBITA grew 66% to US$1,270 million, driven
by continued focus on volume growth, productivity and cost containment.
EBITA margins have continued to improve in most of our businesses,
reaching 18.1% for the group excluding Miller. The lower EBITA
margin at Miller has diluted the group's margin in comparison
with the prior year. Adjusted earnings were up by 66%, to US$581
million, with adjusted earnings per share of 54.0 US cents,
up 11% on the prior year.
The board has proposed a final dividend of 18.5 US cents per
share, making an unchanged total of 25.0 US cents per share
for the year. The dividend is covered 2.2 times by adjusted
earnings and is in line with our declared aim of achieving dividend
cover of 2.2 to 2.5 times. Shareholders will be asked to ratify
this proposal at the annual general meeting, scheduled for 30
We acquired Miller Brewing Company in July 2002. In the nine
month reporting period, after adjusting for a distributor stock
reduction programme implemented
in March, total Miller volume was down 3.7% with domestic volume
falling by 4.5% (6.2% before adjustment). Contract brewing volumes
grew 3.6% and international volumes grew by 6.6%.
EBITA for the nine month period was US$250 million, before exceptional
items, reflecting volume decline, as well as the negative impact
of brand, pack and geographic mix, increased cost of raw materials
and greater energy costs, offset partly by higher selling prices.
EBITA for the period was determined after providing for a number
of significant one-time charges associated with the Flavoured
Malt Beverage (FMB) brands, Sauza Diablo and Stolichnaya Citrona,
and the reduction of four and one-half days of inventory held
in distributor warehouses.
Since acquiring the business we have commenced the integration
of Miller into the group and strengthened the management team,
whilst developing our longer term strategy and action plans to
deliver value. We expand on these issues in the Review
Our Central America business delivered a first full year EBITA
contribution of US$56 million, before exceptional items,
which was below our expectations. This was largely due to aggressive,
and in our view unsustainable, price-based competition in the
carbonated soft drinks (CSD) market in El Salvador. Since acquisition
we have undertaken a major restructuring of the business, reducing
costs and rationalising headcount and have brought in management
with extensive CSD experience. We are confident that the CSD profit
pool in El Salvador will be re-established over time and that
the changes we have made in the business, combined with positive
forecasts for economic growth, will deliver improved earnings
performance in the year ahead.
Our Europe operations delivered another excellent year of profit
growth. EBITA was up 39% to US$275 million with almost every country
improving volumes, market share and margins. Poland, our largest
contributing business, grew EBITA strongly on the back of 9% volume
growth. Volumes in our Russian business grew 27% following the
introduction of new brands and packaging. The Pilsner Urquell
brand grew volumes by 12% in the Czech Republic, and volumes outside
the country increased by 17% to 653,000 hls.
On 14 May 2003, the group announced it had reached an unconditional
agreement to acquire a majority interest in Birra Peroni, the
number two brewer in Italy, with rights to increase the holding
in the future. The transaction was completed on
4 June 2003 and SABMiller has an initial stake of 60%. The
acquisition was funded
in cash, from existing resources.
Africa & Asia
Africa & Asia performed exceptionally well, with EBITA up
36% to US$233 million. Africa benefited from strong volume growth
in key markets, market share gains and the results of successful
acquisition activity. Our equity accounted associate, Castel,
also delivered strong results. In China, the Wuhan and Blue Sword
acquisitions have been successfully integrated and EBITA has more
than doubled. In India we achieved our target of break-even at
the operating profit level in our first full year incorporating
four operating units.
On 21 May 2003 we announced that SABMiller's subsidiary, Mysore
Breweries, had become a strong number two brewer in India through
a joint venture with the Shaw Wallace group of companies. This
positions us well in the high growth Indian beer market.
Beer South Africa EBITA grew by 18% to US$338 million, with
volumes up 0.8%. Operating performance in this business is at
an alltime high, with operating margin
up 80 basis points. Improved productivity was offset by significant
increases in raw material prices,higher marketing spend on new
product development and introductions into the marketplace.
ABI succeeded in delivering good results through volume growth
and overhead productivity gains, and EBITA increased by 24%.
Southern Sun achieved strong earnings growth this year with positive
operational contributions coming from both the hotel and gaming
Our strategy to grow shareholder value remains focused upon
four key elements.
The first is to drive volume and productivity. We were pleased
that last year we saw volume growth in our South African beer
business, which once again delivered operating margin improvement.
In Europe, our businesses in virtually all of the seven countries
in which we operate have grown volumes by more than the market
increase and have achieved year-on-year market share gains. In
Africa, we continue to see excellent volume and market share performances
in key countries.
The second element of the strategy is to optimise and expand our
existing positions through acquisitions. We continue to seek opportunities
to achieve growth within individual countries or geographic regions,
where we can build strong positions, leverage synergies and achieve
economies of scale. The acquisition by our Polish subsidiary Kompania
Piwowarska, of the Browar Dojlidy brewery, announced during the
year, is a good example of this type of transaction.
The third area of our strategy is to seek value-adding opportunities
to enhance our position as a global brewer. We continue to believe
that economic development, converging customer taste and lowering
of trade barriers will drive further consolidation of the beer
market. Currently, the four leading brewers account for around
only 33% of the global market compared to between 50% and 80%
for other consumer sectors. Companies with a global footprint
will benefit from the economies of scale that consolidation will
bring and will, we believe, deliver greater shareholder value
in the medium to longer term.
Growing our brands in the international premium beer segment is
the fourth, and so far, the least developed element of the strategy.
Our portfolio of premium brands now contains Pilsner Urquell,
Miller Genuine Draft, Peroni and Castle. We believe that there
are real opportunities to increase sales in this growing segment
through leveraging our distribution platforms around the world.
By pursuing this strategy we have built a business that
delivered adjusted earnings per share growth of 11% for the financial
year ended March 2003. But we cannot be complacent. We will continue
to focus relentlessly upon operational efficiency and work hard
on strengthening our regional brands and market positions, pursuing
acquisitive growth only where we can see the potential to add
real value for shareholders.
Focusing on marketing
SABMiller has portfolios of strong national and regional brands
principally based on the mainstream segments of the market. Our
challenge is to support these regional brands to ensure that we
retain or, in the case of Miller restore, their brand health.
We are also looking to build our positions in the premium or"worth
more" segments that are driving what volume growth there
is in developed markets. Crucialto this is our international brand
portfolio described earlier.
To strengthen marketing focus and co-ordinate the drive behind
our international premium brands, we have created a new role
of group marketing director.
In addition, we are focusing on innovation and have
had some notable successes in South Africa with Brutal Fruit and
Sterling Light (see
), and with Redd's in Poland and East Africa.
The difference is clear
The people of SABMiller are what makes us different. We have
many talented, creative and driven individuals who are dedicated
to the business. We have recently created a new role of group
human resources director to ensure that we maximise the potential
of our existing team, inculcate our performance culture across
the group and widen our pool of talent, while continuing to recruit
individuals of the highest calibre.
I recognise that our growth has been rapid and this has placed
huge demands on our employees. I thank each and every one of them
for their hard work and commitment. There are still many challenges
and milestones ahead of us and I am sure that we will continue
to meet and exceed these,as we have done so well in the past.
The global economic and socio-political outlook remains uncertain.
However, SABMiller is a business which has geographic reach and
balance, a quality brand portfolio, a widespread distribution
network and financial strength. It remains well placed to continue
to deliver value for shareholders.
We have commenced our restructuring of the Miller organisation,
but major benefits will only be evident over time. There are some
positive signs in Central America, although competitive pressures
remain. Our other businesses have all performed extremely well,
and it is expected that this momentum will continue into the current