SAB Ltd posts strong performance in year to end March 2011
19 May 2011
- SAB Ltd revenue grows 17% to US$5,598-billion (8% on a constant currency basis)
- EBITA grows 21% to $1,067-billion (11% on constant currency basis)
- EBITA margins improve by 60 basis points to 19.1%
- First full year dividend of R94,4-million announced for Zenzele, SAB's empowerment deal
- Lager volumes grow 2% to 26,3-million hl
- Soft drinks post 3% growth in volumes to 17,6-million hl
- Beer and soft drinks businesses post strong working capital and cashflow positions
Johannesburg, 19 May, 2011 - The South African Breweries Ltd today announced a strong improvement in earnings and revenue for the year ended March 2011 as the new business strategy, launched in 2009, gained real momentum.
SAB's improved performance was achieved despite a challenging environment during the year under review, with intensified competition and the fact that the Easter peak period fell into the previous financial year.
The improved performance resulted in the company declaring a full year dividend under its black economic empowerment scheme Zenzele of R94,4-million, which delivers excellent value for shareholders in the first year.
SAB is made up of the beer business, soft drinks division ABI, Appletiser and a 29% stake in Distell.
SAB revenue grew 17% to US$5,598-billion (or 8% on a constant currency basis) in the review period from $4,777-billion previously, driven largely by strong volume growth and improved price management in the beer and soft drinks businesses.
EBITA grew by 21% to US$1,067-billion (or 11% on a constant currency basis) from $885-million and EBITA margins showed a 60 basis point improvement to 19.1% from 18.5% previously.
SAB Chairman and MD Norman Adami said: "In the beer business, the successes of our new business strategy have seen us return to growth, having stabilised and improved our market share while also showing solid margin improvements. In soft drinks, the growth strategy is starting to make good progress. We believe that the company will continue to build from strength to strength."
Full year empowerment dividend of R94,4-million announced
SAB's broad-based black economic empowerment transaction, SAB Zenzele, was concluded during the review period. It resulted in the creation of almost 40 000 new shareholders and a total of 8.45% of the company's shares has been placed under black ownership.
One of the most unique features of SAB Zenzele was the payment of cash dividends to shareholders from the first year. Based on SAB's performance in the review period, the SAB Ltd Board has declared a full year dividend of R94,4-million in respect of the shares held by the SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited. The dividend for the first half of the financial year amounted to R32,45-million and the second half dividend amounted to R61,91-million. The second half dividends will be paid out on 31st May 2011 for the Foundation, and by 3rd June for retailers and employees.
The newly created SAB Foundation, which supports community based projects, will receive a full year dividend totalling R17,19-million, made up of R5,91-million in the first half and R11,28-million in the second half. These funds will be used to benefit the wider South African community, focused particularly on promoting entrepreneurship amongst historically disadvantaged people.
SAB Zenzele Holdings Ltd, which holds shares for the benefit of retailers, will receive a total dividend for the full year of R39,30-million, made up of R13,51-million for the first half and R25,79-million for the second half. Retailers who acquired the minimum allocation of shares for R100 will receive more than R600 in dividends for the full year, or six times their initial investment, while at the top end retailers will receive up to R4 000.
Employee beneficiaries of the SAB Zenzele Employee Trust will receive a full year dividend totalling R37,87-million, made up of R13.02-million in the first half and R24,85-million in the second half. The average employee on the shop floor will receive a dividend of almost R1 300 for the full year, with higher grades receiving more.
Mr Adami said: "All aspects of our empowerment transaction have now successfully transpired. The intent behind SAB Zenzele was to have a truly broad-based, innovative and value adding transaction. The dividend of R94,4-million for the first full year provides evidence of these concepts in action. We are very proud that our good intentions are actually translating into progress that is real, tangible and truly broad-based."
SAB Beer business
Lager volumes grew 2% to 26,3-million hectolitres (hl) from 25,8-million hl the previous year. This was a particularly strong performance given that the period under review did not include an Easter peak, with the peak falling into the previous financial year.
The results show that SAB's new business strategy, launched in early 2009, continued to gain momentum. SAB also stabilised and improved its market share, with the four largest brands collectively showing good growth.
SAB continued to make significant investments in market facing operations, funded largely by a wideranging cost containment exercise. Nevertheless, a focus on ensuring tight working capital and capital expenditure resulted in strong cash flows.
The strong performance was a direct result of ongoing progress being made in the implementation of the division's business strategy. Key achievements included:
- The cost base has been fundamentally restructured over the past two years. More than R1-billion in savings has been freed up and an incremental R1,4-billion invested in market facing activities;
- Collectively, mainstream power brands have been restored to growth;
- Local premium brands have been successfully repositioned, with Castle Lite achieving a moving annual growth rate of over 25% to become the largest and fastest growing premium brand in SA;
- SAB's three global brands have been re-launched, with a specialized marketing and sales organization having been developed to support them;
- A step change in retail execution and customer service has been achieved, with SAB's reach and intensity significantly improved with the four key classes of trade. The result is that SAB now significantly outperforms our competitor;
- SAB Zenzele, was hailed as "a deal of the year" in SA by Dealmakers Magazine and is seen as a new standard for empowerment schemes.
In addition to the Zenzele transaction, SAB's alcohol strategy, launched in September 2009, has made significant progress. The innovative strategy is a multi-faceted effort to combat alcohol abuse and its negative effects on society. One of the aspects of the strategy includes the funding of 15 alcohol evidence centres around the country over the past 18 months at a cost of R1 million each, with more the come. These centres help the South African Police Services to far more efficiently and effectively process drivers suspected of being over the legal alcohol limit. Other initiatives included a hard hitting awareness campaign called Reality Check and partnering with non-governmental organisation to try to combat Foetal Alcohol Syndrome.
SAB has also welcomed the decision by the Competition Tribunal to set aside the case brought against it by the Competition Commission on alleged anti-competitive behaviour. SAB believed it had a strong case, and it was important that the principles of fairness be confirmed in this matter.
Soft drinks business
Soft drinks volumes increased 3% to 17,6-million hl from 17,0-million hl due mainly to early successes in the implementation of a new growth strategy.
The strategy implementation for ABI is now well under way. It is focused on growth, improving customer service, investing in market facing operating infrastructure and improving productivity throughout the supply chain. Good progress has been made on all elements of the strategy since it was launched last year, with the following key achievements produced:
- Retail execution and customer service has been improved;
- Revenue growth management and cost competitiveness have been strengthened;
- The relationship with The Coca-Cola Company is now aligned, cementing the platform for an ongoing and productive relationship;
- Several initiatives to drive down operating costs and improve productivity are moving ahead well, including improved primary distribution, packaging costs savings and streamlining warehousing operations;
- In its drive to increase penetration and reach, 40 model markets have been established across numerous townships, with approximately 30 000 additional customers now being serviced.
ABI has excellent growth potential and is investing to ensure that it has the capability and capacity to capitalise on this. As a result, ABI added 10% new PET Bottle capacity in 2010 with plans to add another 25% during 2011. Investments in cold drinks fridges will double over the next five years and ABI will increase its employee complement in critical areas, having added more than 100 more sales representatives last year amid plans to optimise and increase this over the next three years.
In addition, ABI has invested in improved technology with state of the art call centre software to enhance telephone sales and problem resolution as well as more advanced information systems for sales reps and distribution partners.
Appletiser reversed its previous performance, delivering solid revenue growth and a good EBITA performance.
Associate Distell increased volumes and revenue, with cider and ready-to-drink growth partially offset by a decline in wines and spirits, predominantly in the domestic market. EBITA improved and margins were adversely impacted by the negative sales mix and the exchange rate.
For further information, please contact Robyn Chalmers on 082 924 2267 or Benedict Maaga on 079 890 7300