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Chairman’s Statement

Meyer Kahn

Dear Shareholder

This has been another successful year for the group, with a strong volume performance and good earnings growth.

Our portfolio of developing and developed market operations generated 10% organic growth in lager volumes and 12% growth in earnings before interest, tax and amortisation (EBITA) on an organic, constant currency basis. Group EBITA now stands at US$3,591 million and the group EBITA margin increased to 17.4%, a rise of 20 basis points over the prior year. This translated into a 14% increase in profit before tax to US$2,804 million and a 10% increase in adjusted earnings per share to 120 US cents.

Total lager volumes stood at 216 million hectolitres, up 10% organically, and up 23% after taking into account the first full year of contributions from our South American businesses. Including soft drinks and other beverages, the group achieved total beverage volumes of 272 million hectolitres, up 10% on an organic basis and 23% above last year on a reported basis.

Net cash generated from operations, at over US$4,000 million, was 22% above the prior year, reflecting the overall strength of the trading performance and our strong cash characteristics. The group's gearing decreased at the year end to 45.8% from last year's 52.3%.

The board has proposed a final dividend of 36 US cents per share, making a total of 50 US cents per share for the year, an increase of 14% over the prior year. The dividend is covered 2.4 times by adjusted earnings per share.

Line graph showing share price in £ sterling from 1 April 2002 to 31 March

Operational highlights

Europe delivered an excellent full-year performance, its sixth consecutive year of double-digit earnings growth, with EBITA of US$733 million, up 29% on a reported basis. Poland and Russia continued their run of strong growth while Romania increased its volumes by 23%. It was also pleasing to see a solid improvement in profitability from Italy.

In Latin America, our strategy is delivering volume, revenue and earnings growth ahead of our expectations, with EBITA of US$915 million. New brand launches and package renovations are beginning to lift the image of beer in consumers' minds and contributed to an acceleration of volume growth in the second half of the year. We also continue to benefit from the region's strong economic growth.

It's been a tough year for Miller, our North American business, with rising commodity costs and intense price competition continuing to diminish the value of the beer market. As a result, EBITA for the period of US$375 million was 17% lower than the previous year. Nevertheless, we are undeterred and the leadership team has a clear plan to return the business to growth.

Our portfolio of businesses in Africa has performed well and we now see much greater economic stability in these markets.

In Asia, our Chinese associate continues to power ahead, with the Snow brand established as the national leader. In India, volumes were up strongly, albeit from a small base. EBITA for the Africa and Asia region was US$467 million, up 11% despite currency weakness in some countries.

In South Africa, new marketing and pack innovations continued to drive growth in the premium lager category while soft drinks sales were strong, particularly in the final quarter. The result was a good earnings performance, with EBITA of US$1,102 million, a 14% increase on a constant currency basis. The loss of the licence to brew a major premium beer in South Africa in March 2007 had no impact on performance in the period under review.

Continuing growth

This has been a busy year, with the group actively shaping and expanding its international portfolio of businesses. Acquisitions and joint ventures in China, Vietnam, Australia and Angola have been further steps in creating an attractive, international spread of businesses with good exposure to fast growing, developing markets.

Along with our wide international footprint (now covering over 60 countries on six continents), we continue to benefit from our increasing scale. Since our UK listing in 1999, our lager volumes have grown from 48 million to 216 million hectolitres a year – an increase of 350%. Over the same period, group adjusted earnings have risen from US$394 million to US$1,796 million. As a result, total shareholder return since 1999 stands at 217% compared with 31% for the FTSE 100 as a whole (as measured at 31 March 2007).

This is a strong record and due in no small measure to the rigorous application of a clear, consistent strategy, designed to reap maximum rewards from the opportunities we face. On the following pages our Chief Executive, Graham Mackay, gives more details of the strategy itself and how its application has contributed to our growth in the past year.

But it's not just about growth, for we also take great pride in the quality of our product. Our high standards have again been recognised in a long list of brewing awards. We were particularly pleased that Miller was recognised as US Brewmaster of the Year at the World Beer Cup.

  • Miller Lite – American-Style Light Lager
  • Miller High Life – American-Style Lager
  • Icehouse – America-Style Speciality Lager
  • Henry Weinhard's Classic Dark – American-Style Dark Lager

Sustainable development

In seeking to do the best for the countries and communities in which we operate, we believe we contribute most by simply running successful businesses that create jobs and stimulate local economic activity. A recent study by the Bureau for Economic Research in South Africa supports this view by revealing that our South African business, as well as employing 8,600 people directly, supports 46,000 jobs among first-round suppliers and over five times that number in the wider economy. Every rand in sales revenue generated by the business adds R1.80 to South Africa's GDP.

As mentioned last year, our approach to corporate responsibility has been codified in ten environmental and social priorities. All our businesses are now embedding these priorities into their operations and striving to ensure that they meet the required standards.

One of these priorities is to promote the responsible consumption of alcohol, and we support programmes around the world that address the misuse of alcohol. That said, we disagree with broad regulatory proposals for reducing consumption in the general population. We question whether such proposals would succeed and believe they may have unintended consequences such as fostering illicit alcohol production, with significant health risks for consumers. They would also penalise the overwhelming majority of our consumers who enjoy our products responsibly.

In January 2007, SABMiller committed itself to the ten principles of the UN Global Compact that seeks progress in human and labour rights, environmental protection and tackling corruption. Our alignment with the UN in this way supports the implementation of our own sustainable development framework and ensures we align with worldwide best practice.

Our people

We were delighted to welcome John Davidson, who joined the group in August, as our new General Counsel and Group Company Secretary. Our thanks go to his predecessor, Andrew Tonkinson, for 14 years of excellent service to the board. In May 2007, we announced that Nancy De Lisi had stepped down from the board following her retirement from the Altria Group. We thank her, too, for her outstanding contribution to our deliberations and wish her a long and happy retirement. Altria's nominee as her successor is Dinyar Devitre, Senior Vice President and Chief Financial Officer, whom we welcomed to the board on 16 May.

We are fortunate in the high calibre of our directors and I would like to thank all my board colleagues for their wise counsel and strategic advice during the year. I also recognise that this year's strong performance reflects the dedication and hard work of all our executives, managers and staff around the world. My thanks go also to them as well as to our business partners and to you, our shareholders, for your continuing support.

As part of our responsibility to shareholders, we aim to observe the highest standards of corporate governance. To this end, we have further refined our reporting processes to align them more closely to the UK government's OFR requirements. The changes are reflected in this year's Annual Report.


This has been another year of good growth for the group, with a particularly strong performance in the fourth quarter.

We have established a compelling portfolio of brands and businesses and, given the strong growth in many markets, we will be increasing our investments behind these assets in the coming year. While we face some challenges, including increasing commodity cost pressures and the need to rebuild our share of the premium segment in South Africa, we expect the group's underlying progress of recent years to continue.

Meyer Kahn



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