The current year represents the first full year of the group's
ownership of its Central American investments. The period under
review was characterised by weak economic performance in both
El Salvador and Honduras and strong competitive pressures in the
CSD market, particularly El Salvador. Major structural changes,
aimed at establishing a foundation for future growth, have been
actioned in both of our businesses.
Against this broad background, CSD volumes were down in both El
Salvador and Honduras, registering a 6.9% decline in total versus
the comparable prior year. In particular, El Salvador endured
the entry of an aggressive CSD competitor, which has effectively
led to a short-term and, we believe, unsustainable reduction in
prices. Lager volumes fared better, and were flat on a pro forma
Honduras achieved a 4.4% growth the first time that growth
has been achieved in four years, but there was a 6.5% decline
in El Salvador. Water volumes in El Salvador were up 1%.
Sales declines have depressed the reported EBITA performance and
reduced operating margins. However, the year has been one of major
structural change. The restructuring of our Central American businesses
has proceeded well. In each country we have merged the sales and
distribution functions for beer and CSDs. We have rationalised
packaging assets in the businesses and closed certain production
and distribution sites. Across the region we have merged our back
office operations and integrated our financial systems. This has
resulted in significant headcount reduction in both countries'
operations and will lead to substantial savings in future financial
years. The El Salvadorian companies have been merged and we expect
to do the same in Honduras in the current year.
The strategy is to continue the conversion of the company into
a marketing focussed enterprise with a strong portfolio of relevant
brands. A number of brand and packaging changes are planned, and
these should support improved performance in the market place.
Initiatives are also in place to improve production efficiencies
with the roll-out of the World Class Manufacturing initiative,
continued rationalisation of surplus facilities and ongoing sales
and distribution integration.