Chief Executive’s review

We benefit from a balanced and attractive spread of businesses spanning 75 countries on six continents. At the same time, we’re seeking to develop strong, relevant brand portfolios to meet the needs of consumers within each market.

Review of operations

In Latin America, efforts of recent years to raise the appeal of beer as a category, to build our brands and brand portfolios and to enhance our sales activities have resulted in beer taking a rising share of the alcohol market. In Peru and Ecuador a favourable trading environment and good market execution boosted lager volumes in both these markets, but the economic slowdown impacted sales in Colombia and Central America. As a result, organic lager volumes for the region grew by 1% overall. With continued robust pricing and greater productivity offsetting higher commodity costs, the region’s EBITA margin improved by 100 bps and EBITA grew by 11% on an organic, constant currency basis.

In Europe, organic lager volumes were in line with last year as economic conditions deteriorated sharply in the second half, putting pressure on consumers’ disposable income. Against this background, the group achieved good market share gains in Poland, Romania and the UK with strong momentum behind key brands. Revenue per hectolitre was up 6%, but strong pricing and increased efficiencies did not entirely offset higher input costs. As a result, reported EBITA declined by 1% and organic, constant currency EBITA fell 5%. In view of the economic downturn, the European operation has restructured some of its businesses to cut costs.

Profits grew strongly in North America with a good earnings contribution from Miller Brewing Company in the first quarter and a strong financial performance from the MillerCoors joint venture since it started operations on 1 July 2008. EBITA grew 22% for the full year assisted by robust pricing and the synergies resulting from rapid, early integration of the businesses. Domestic sales to retailers were down slightly for the nine months’ trading as MillerCoors. However, the trend returned to growth in the final quarter, led by improved performances from Coors Light, Miller Lite and Miller High Life and continued strong growth in MGD 64, Keystone Light, Blue Moon and Peroni Nastro Azzurro.

In Africa, our strategy of broadening our brand portfolio with premium and affordable offerings contributed to a 10% growth in organic volumes. Tanzania increased its lager volumes by 4% with strong growth in the Eagle brand. In Angola, both soft drinks and lager performed well after significant investment in new capacity. Mozambique’s lager volumes were marginally ahead of last year’s. In Botswana, the introduction of a 30% levy on alcohol in November 2008 resulted in an 8% decline in lager volumes for the full year. A major capital expenditure programme continues in Africa with a brewery in southern Sudan recently completed and three further breweries scheduled to open in the current year.

In Asia, lager volumes increased by 4% organically in China. The Snow brand, now one of the largest beer brands in the world by volume, enjoyed strong growth of 19%. Although margins in China remain slender, we’re pleased that the price increases put through at the end of the prior year seem to be holding. Volumes in India grew by 5% despite continued regulatory issues, particularly in the key market of Andhra Pradesh. EBITA for Africa and Asia combined grew by 16% on an organic, constant currency basis.

In South Africa, lager volumes were 2% down on the prior year as consumer spending weakened, sales were hit by new provincial legislation in the Western Cape and the high-selling Easter period fell later in the calendar year. Revenue growth of 11% on a constant currency basis reflected strong pricing in both lager and soft drinks. However, this was not enough to offset higher input costs and EBITA margin consequently declined. In a competitive environment, we launched two new premium lager brands and a premium, dry, apple-flavoured lager and intensified our sales and marketing. Constant currency EBITA fell 8% with reported EBITA down 26% – the difference due to the weakening rand exchange rate against the dollar.

Graham Mackay, Chief Executive