Chief Financial Officer’s review

The majority of the currencies in which the group operates weakened against the US dollar, reducing reported group revenue by 5%. The transactions completed in the financial year in the Ukraine and Russia, partially offset by the disposal of soft drinks businesses in Colombia and Bolivia, had the effect of increasing reported group revenue by 2%.

In the past five years, the group has grown revenue strongly, both on an organic basis and by acquisition. The compound annual organic growth rate in volumes was 4.6% (2008: 5.4%), and compound annual growth in group revenue was 8.6% (2008: 8.5%) over the same period.

The contribution of the US and Puerto Rico operations into the MillerCoors joint venture during the year and the resultant exclusion of the group’s share of MillerCoors’ revenue from the reported statutory measure of revenue has had the effect of reducing reported revenue to US$18,703 million.

Input costs

Over the past two years raw material input cost pressures have had a significant impact on our cost base. In the past year, total raw material costs have risen by 16% per hectolitre on a constant currency basis following a 9% increase in the prior year. Input cost pressures in the year were primarily driven by higher brewing raw material costs which saw malt and barley prices rising more than 32% per hectolitre on the prior year on a constant currency basis. Packaging raw materials were up high single digits on the same basis. Similarly, total cost of goods sold were up 12% on the same basis compared with a rise of 6% in the previous year reflecting the benefit of lower distribution costs in the second half of the past year when crude oil prices dropped from their peak. Local input costs have also been adversely affected by the strength of the US dollar, the predominant currency in which our raw materials are purchased.

The group takes out supply contracts for future commodity requirements and actively engages in a hedging programme to mitigate the effect of commodity price increases. Although the market prices of commodities reduced considerably in the second half of the year, the group did not benefit from these lower prices as a result of the rates and timing of its forward contracts and the hedging programme. The group expects that some benefits will be felt progressively during the second half of the forthcoming year.


The group chooses to report EBITA in its results in order to accord with the manner in which the group is managed. SABMiller believes that the EBITA profit measures give shareholders additional information on trends and make it easier to compare different segments. Segmental performance is reported after the apportionment of attributable head office service costs.

The chart (right) shows the organic increase in EBITA for each of the last five years with each year’s performance shown in constant currency. In the year EBITA grew 5% on an organic, constant currency basis. Reported EBITA, which includes the impact of currency movements, acquisitions and disposals, was in line with the prior year at US$4,129 million, as the effects of weaker currencies and higher input costs offset the impact of increased revenue and cost productivity and efficiency savings.

Double digit growth in organic, constant currency EBITA was achieved in Latin America, North America and Africa and Asia, enabling the group to absorb the declines in South Africa and Europe and still achieve a good overall performance for the year.

EBITA margin

The group has a strong record in protecting and developing profitability to raise the performance of local businesses as reflected in group EBITA margin trends in the chart (below). In the year under review, group revenue growth and cost efficiencies were insufficient to offset fully the effects of the significant rise in input costs, together with currency weakness and consequently the group’s reported EBITA margin was 110 bps lower than the prior year at 16.3%. EBITA margin on an organic, constant currency basis of 16.7% was 40 bps higher than reported EBITA margin, primarily owing to lower margins earned in acquired businesses in Europe, and 70 bps lower than prior year due to higher input costs.

EBITA margin performance

(%) Organic, constant currency basis

Exceptional items

Items that are material either by size or incidence are classified as exceptional items. Further details on the treatment of these items can be found in note 4 to the consolidated financial statements.

Net exceptional charges of US$89 million before finance costs and tax were reported during the year (2008: net charges of US$112 million) including net exceptional charges of US$91 million (2008: US$nil) related to the group’s share of joint ventures’ and associates’ exceptional charges. The net exceptional charge included a charge of US$110 million for integration and restructuring costs in Latin America, Europe and North America, impairment charges of US$392 million in Europe, a charge of US$9 million for the unwinding of fair value adjustments on inventory relating to the acquisition of Grolsch and a US$13 million litigation charge, partially offset by US$437 million profit on the deemed disposal of 42% of the US and Puerto Rico operations of Miller and US$89 million profit on the disposal of soft drinks businesses in Colombia and Bolivia. The group’s share of joint ventures’ and associates’ exceptional charges of US$91 million included a charge of US$33 million related to the group’s share of MillerCoors’ integration and restructuring costs, a US$13 million charge for the group’s share of the unwinding of fair value adjustments on inventory in MillerCoors, a charge of US$38 million for the group’s share of the impairment of the Sparks brand intangible in MillerCoors and a charge of US$7 million being the group’s share of fair value mark to market losses on financial instruments in Tsogo Sun.

In addition, there was an exceptional gain in the year of US$20 million (2008: US$nil) within net finance costs relating to the early termination of financial derivatives.

In 2008 net exceptional charges of US$112 million were reported, of which US$78 million related to restructuring costs incurred in Latin America, partially offset by a net profit of US$17 million on the disposal of soft drinks businesses in Costa Rica and Colombia. In North America, costs of US$51 million were recorded in relation to retention accruals pending the completion of the MillerCoors joint venture and certain integration costs.

Finance costs and tax

Net finance costs increased to US$706 million, a 55% increase on the prior year’s US$456 million. Finance costs in the current year include a net loss of US$27 million (2008: gain of US$35 million) from the mark to market adjustments of various derivatives on capital items for which hedge accounting cannot be applied. Finance costs in the year also included a US$20 million gain on the early termination of financial derivatives. The mark to market loss and the financial derivative termination gain have been excluded from the determination of adjusted finance costs and adjusted earnings per share. Adjusted net finance costs were US$699 million, up 42%. While year end net debt was favourably impacted by currency movements over the last quarter, average net debt balances during the year increased. This reflected funding of capital expenditure and the timing of the acquisitions of Grolsch, CJSC Sarmat and LLC Vladpivo. Interest cover, as defined in Definitions.

The effective tax rate of 30.2% before amortisation of intangible assets (other than software), exceptional items and the adjustments to finance costs noted above, was below that of the prior year (2008: 32.5%). The key drivers were a more favourable geographic profits mix, certain statutory tax rate reductions and continuing initiatives to seek efficiency in the group’s effective tax rate.


The rand declined against the US dollar during the year, ending the financial year at R9.61 to the US dollar compared with R8.15 at the start of the year, while the weighted average rand/dollar rate weakened by 20% to R8.87 compared with R7.13 in the prior year. The Colombian peso (COP) weakened by almost 29% against the US dollar compared to the prior year and ended the financial year at COP2,561 to the US dollar compared with COP1,822 at 31 March 2008. The weighted average COP/dollar rate weakened by 3% to COP2,061 from COP1,997 in the prior year.

Profit and earnings

Adjusted profit before tax of US$3,405 million decreased by 6% over the prior year primarily as a result of higher commodity costs, increased finance costs and the impact of the translation of local currency results into US dollars. On a statutory basis, profit before tax of US$2,958 million was 9% lower, including the impact of exceptional items and the adjustments to net finance costs noted above.

The group presents the measure of adjusted basic earnings per share, which excludes the impact of amortisation of intangible assets (other than software) and other non-recurring items including post-tax exceptional items, in order to present a more useful comparison of underlying performance for the years shown in the consolidated financial statements. Adjusted earnings decreased by 4% to US$2,065 million and the weighted average number of basic shares in issue for the year was 1,502 million, up marginally from last year’s 1,500 million.

Adjusted earnings per share were 4% lower at 137.5 US cents. The group’s adjusted earnings per share showed double-digit increases when measured in rand and sterling. On a statutory basis, basic earnings per share of 125.2 US cents were 7% lower. A reconciliation of the statutory measure of profit attributable to equity shareholders to adjusted earnings is shown in note 8 to the consolidated financial statements.


The board has proposed a final dividend of 42 US cents to make a total of 58 US cents per share for the year – unchanged from the prior year. This represents a dividend cover of 2.4 times based on adjusted earnings per share, as described above (2008: 2.5 times). The group’s guideline is to achieve dividend cover of between 2.0 and 2.5 times adjusted earnings. The relationship between the growth in dividends and adjusted earnings per share is demonstrated in the adjacent chart. Details of payment dates and related matters are disclosed in the directors’ report.

Acquisitions and disposals

In June 2008 the group acquired the Russian brewer LLC Vladpivo (‘Vladpivo’) and in July 2008, it acquired a 99.84% interest in the Ukrainian brewer CJSC Sarmat (‘Sarmat’).

During the year the group acquired an effective 57% interest in Pabod Breweries (‘Pabod’) in Nigeria and an effective 80% interest in Voltic International Inc (‘Voltic’), which has water businesses in Ghana and Nigeria. These acquisitions, together with the group’s investment in southern Sudan, are held on an 80:20 basis with Castel.

In March 2009 the group acquired the 50% interest in the Vietnamese brewing business, SABMiller Vietnam JV Company, which it did not already own.

On 30 June 2008, SABMiller and Molson Coors Brewing Company announced the completion of the transaction to combine the US and Puerto Rico operations of their respective subsidiaries, Miller Brewing Company and Coors Brewing Company, in a joint venture, MillerCoors, which began operating as a combined entity on 1 July 2008. SABMiller has a 58% economic interest in MillerCoors and Molson Coors has a 42% economic interest. Voting interests are shared equally between SABMiller and Molson Coors, and each of SABMiller and Molson Coors has equal board representation.

The group completed the disposals of its water business in Colombia and its soft drinks business in Bolivia in February and March 2009 respectively.

In China, our associate, CR Snow, has continued to consolidate its position as the country’s largest brewer with the purchase of a further three breweries.

Subsequent to the year end, the group has acquired the outstanding 28.1% minority interest in its Polish subsidiary, Kompania Piwowarska S.A. in exchange for the issue of 60 million ordinary shares of SABMiller plc.

Malcolm Wyman, Chief Financial Officer

EBITA growth

(%) Organic, constant currency basis

Adjusted EPS and Dividend per share

US cents