5. Exceptional items

Bottling AppletiseBrewery scenePilsener beer

The following items were treated as exceptional by the group during the years ended 31 March:

 
 
2005
US$m
2004
US$m
Recognised in operating profit:    
North America    
Profit on disposal of Tumwater brewery 4
Brewery closure costs in Tumwater 1 4
Miller integration and restructuring costs 2 (13)
Asset impairment (5)
  7 (14)
Central America    
Reorganisation costs (6)
 
Europe    
Brewery closure costs in Italy (35)
Restructuring costs in the Canary Islands (16)
Water plant closure costs in the Canary Islands (6)
  (51) (6)
Hotels and Gaming    
Restructuring costs (4)
  (48) (26)
Taxation (charge)/credit (1) 7
Minority interests’ share of the above items 8 5

The sale of the Tumwater brewery in North America, which was completed in April 2004, resulted in a profit of US$4 million in 2005. In 2005 US$1 million of the Tumwater closure costs provided in 2003 were deemed surplus and were credited to the profit and loss account (2004: US$4 million credit).

In 2005 US$2 million of the restructuring and integration costs provided in the prior year were deemed surplus and were credited to the profit and loss account (2004: US$13 million charge).

Following the decision during 2004 to cease the production and distribution of Flavoured Malt Beverages (FMBs) with the exception of the SKYY brands at Miller, an impairment charge of US$5 million was taken against assets used in FMB production.

Following the group’s acquisition of brewing and soft drink bottling interests in Central America towards the end of 2001, costs were incurred to restructure the Central American operations of US$6 million in 2004. These expenses consisted primarily of retrenchment costs.

Following the acquisition of Birra Peroni SpA, an operating review resulted in management announcing in October 2004 the closure of the Naples brewery. As a result, the tangible fixed assets have been written down to net recoverable value, resulting in a charge of US$21 million. In addition, the restructuring has resulted in retrenchment costs of US$8 million, Nastro Azzurro re-branding costs of US$2 million and other exit costs of US$4 million.

In March 2005 a restructuring plan for the Canary Islands, Europe, was announced. A provision of US$16 million has been charged to the profit and loss account to cover the costs which primarily relate to severance.

In the prior year there were closure costs amounting to US$6 million related to the closure of the water bottling plant in the Canary Islands. These included the impairment of tangible fixed assets to net recoverable value (US$4 million) and rationalisation costs including redundancy and associated closure costs (US$2 million).

During the course of 2005, US$4 million of costs have been charged to the profit and loss account in relation to restructuring in the Hotels and Gaming division.

 
 
2005
US$m
2004
US$m
Recognised after operating profit:    
Africa and Asia    
Profit on disposal of investment in China 103
Share of associate’s profit on disposal of a CSD business and brands in Morocco 6
Share of associate’s profit on disposal of a brand in Angola 1
  103 7
 
Other Beverage Interests (Appletiser)    
Profit on disposal of trademarks 13
 
Hotels and Gaming    
Share of associate’s profit on disposal of fixed assets 11
 
Central Administration    
Profit on disposal of investment 252
Surplus on pension fund of disposed operation 47
  252 47
  366 67
Taxation (31) (1)

The sale of the group’s 29.4% interest in Harbin Brewery Group Limited (Harbin) was completed in June 2004, realising a profit of US$103 million, after taking into account all associated costs.

During 2004 Castel disposed of its interests in the Cobomi business and brands in Morocco. SABMiller’s share of the profit on disposal was US$6 million. Castel recognised a profit on disposal of the Youki brand in Angola. SABMiller’s share of the profit was US$1 million.

In 2004 Appletiser SA recorded a pre-tax profit on the disposal of its Valpré and Just Juice trademarks of US$13 million, which were sold to a subsidiary of The Coca-Cola Company (TCCC). Appletiser continues to produce the Valpré and Just Juice brands under a manufacturing agreement with TCCC.

In May 2004 Tsogo Sun Holdings (Pty) Ltd (Tsogo Sun) recorded an exceptional pre-tax profit on the sale of two Umhlanga Rocks hotels and land, of which the group’s share amounted to US$11 million.

In July 2004 the group disposed of its entire 21% interest in Edgar’s Consolidated Stores Ltd (Edcon) realising a pre-tax profit of US$252 million. The associated capital gains tax amounted to US$30 million.

The group is still in dispute resolution with Shoprite Holdings Ltd regarding the disposal of the OK Bazaars some years ago. As a result of a surplus arising from the liquidation of the OK Bazaars pension fund, which was returned to the Shoprite group, Shoprite paid The South African Breweries Ltd, OK Bazaars’ former parent company, an after tax equivalent amount of US$47 million in 2004, pursuant to the sale agreement.

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