F12 full year results: SABMiller drives strong results in developing markets
24 May 2012
SABMiller plc, one of the world's leading brewers, reports its preliminary (unaudited) results for the twelve months to 31 March 2012.
- Lager volumes of 229 million hectolitres (hl), 3% ahead of the prior year on an organic basis with particularly strong growth delivered in Latin America and Africa. Soft drinks volumes of 49 million hectolitres, 7% ahead of the prior year on an organic basis
- Reported group revenue up 11%, with organic, constant currency group revenue growth of 7%
Reported EBITA up 12%, with organic, constant currency EBITA growth of 8%:
- Latin America EBITA1 up by 14% as a result of volume growth, pricing and mix
- Europe EBITA1 decline of 9% due to lower volumes, adverse mix and increased raw material costs
- Strong pricing and favourable mix increases North America EBITA1 by 2% despite lower volumes
- Volume growth, strong pricing and mix drives Africa EBITA1 up 16%
- Asia Pacific EBITA1 up 30% with good growth in both China and India
- South Africa: Beverages EBITA1 up by 14% due to price and mix benefits and focus on cost productivity
- EBITA margin increases by 10 basis points (bps) to 17.9%
- Foster's contributes to results from mid December 2011; integration proceeding well
- Adjusted earnings up by 13%, with adjusted EPS up 12% to 214.8 US cents per share
- Continued strong improvement in free cash flow2, up 23% to US$3,048 million
- Full year dividends per share up 12% to 91.0 US cents
1 Segmental EBITA growth is shown on an organic, constant currency basis.
2 As defined in the financial definitions section. See also note 11b.
|Adjusted profit before taxd||5,062||4,491||13|
|Profit before taxe||5,603||3,626||55|
|Profit attributable to owners of the parent||4,221||2,408||75|
|Adjusted earnings per share|
|- US cents||214.8||191.5||12|
|- UK pence||134.4||123.4||9|
|- SA cents||1,607.0||1,369.6||17|
|Basic earnings per share (US cents)||266.6||152.8||74|
|Dividends per share (US cents)||91.0||81.0||12|
|Free cash flow||3,048||2,488||23|
Chief Executive's review
Meyer Kahn, Chairman of SABMiller, said:
"I am delighted to report another year of significant progress and strong results. Through our successful marketing, portfolio development and commercial execution we continued to build on our position in the world's developing consumer economies. Strong profit growth continued, driven by an organic total volume increase of 4% and complemented by favourable mix and pricing. We continued to expand our global footprint with the acquisition of Foster's, the merger of our Russian and Ukrainian businesses with Anadolu Efes in exchange for a stake in the enlarged business, and the further development of our alliance with Castel.”
|Segmental EBITA performance||
|South Africa: Beverages||1,168||9||14|
|South Africa: Hotels and Gaming||135||(2)||3|
The group delivered a strong financial performance. Group revenue grew by 11% (7% on an organic, constant currency basis) as a result of the higher volumes, selective price increases and higher growth in premium brands. Total beverage volumes of 286 million hl were 4% ahead of the prior year on an organic basis, with lager volumes up 3%, soft drinks volumes up 7% and other alcoholic beverages up 4%. Successful development of our brand portfolios and intensified sales execution, together with rising consumer spending drove strong performance in most of our developing markets. Latin America and Africa were particularly notable, while South Africa and the Asia Pacific region also generated significant, profitable growth. Despite strong results in a number of its markets, Europe's financial performance was affected by volume declines in Poland and Romania and significant increases in raw material input costs.
EBITA increased by 12% on a reported basis (8% on an organic, constant currency basis), with all beverage divisions except for Europe contributing to EBITA growth. EBITA margin was 10 bps ahead of the prior year at 17.9%. Group revenue growth (up 4% on an organic, constant currency per hl basis) offset increases in raw material costs (up low single digits on a constant currency per hl basis). Marketing investment rose in line with revenue, while fixed costs increased as a result of expenditure on sales and systems capabilities across our operations and in the corporate centre.
Adjusted earnings were 13% higher as a result of the increased EBITA. Adjusted net finance costs were 5% higher than in the prior year, and the effective tax rate was 27.5%. Adjusted earnings per share were 12% higher at 214.8 US cents.
The group's free cash flow was US$3,048 million, an increase of US$560 million compared with the prior year. Working capital cash flows of US$258 million continued recent positive trends, and reflected ongoing benefits of the group's business capability programmes. Capital expenditure was US$1,639 million, an increase of US$324 million compared with the prior year, with higher spend particularly to increase production capacity in Africa. Net debt at 31 March 2012 was US$17,862 million, up from US$7,091 million at the end of the previous financial year primarily due to the financing of the Foster's acquisition. The Board has recommended a final dividend of 69.5 US cents per share which will be paid to shareholders on 17 August 2012. This brings the total dividend for the year to 91 US cents per share, an increase of 10 US cents (12%) over the prior year.
On 16 December 2011 the group completed the acquisition of Foster's Group Limited (Foster's) in Australia. The acquisition provides us with exposure to Australia's strong economic growth prospects, a leading position in the stable and profitable Australian beer industry, and the opportunity to apply our capabilities and scale to improve Foster's financial and operating performance. The integration of the Foster's business has progressed very well to date despite the loss of some brand licences, which was a known risk at the time of acquisition. With effect from 1 January 2012, together with Castel we implemented a number of organisational changes in our African operations as part of our strategic alliance agreement. Operational management of the Nigerian businesses is now with SABMiller and the Angolan businesses with Castel. On 6 March 2012 we completed our strategic alliance with Anadolu Group and Anadolu Efes Biracilik ve Malt Sanayii AS (Anadolu Efes), exchanging our Russia and Ukraine beer businesses for a 24% equity stake in the enlarged Anadolu Efes group. Anadolu Efes is now the vehicle for both groups' investments in Turkey, Russia, the CIS, Central Asia and the Middle East.
- In Latin America EBITA grew by 15% (14% on an organic, constant currency basis). Lager volumes increased by 8% on an organic basis, and soft drinks by 10% on the same basis. Strong revenue growth, reflecting a combination of higher volumes, selective price increases and favourable mix, was partly offset by higher commodity costs, although we benefited from manufacturing efficiencies. Increased brand and marketing investment was funded by ongoing fixed cost productivity. We continued to benefit from our focus on improving the affordability of certain key lager brands in a number of markets, our differentiated brand portfolios and the expansion of our premium segment, and from the economic growth across the region.
- In Europe EBITA declined by 6% (9% on an organic, constant currency basis), while lager volumes fell by 1% on an organic basis. Financial performance in Poland and Romania was impacted by volume declines, adverse sales mix as a result of consumer downtrading and discounting, as well as planned destocking in our wholesalers. The other markets in the region generally saw stronger financial performance, assisted by good growth in the super premium and premium segments, and selective brand and product innovations. Across the region, EBITA was impacted by significant increases in raw material costs, although our global procurement and regional manufacturing projects continued to deliver mitigating cost efficiencies. The Anadolu Efes transaction was completed on 6 March 2012 and had no material impact on trading performance for the year.
- In North America EBITA grew by 2%. MillerCoors' sales to wholesalers (STWs) fell by 3%, with sales to retailers (STRs) down 2% as economic pressures continued to impact key consumer demographics. The Tenth and Blake crafts and imports division saw double digit growth, although volume declines were experienced in both the premium light and below premium segments. The growth in EBITA was mainly a result of revenue growth from pricing and favourable brand mix, continuous cost savings, partly offset by higher raw material and distribution costs, and systems investments.
- Africa lager volumes increased by 13% on an organic basis, despite capacity constraints in a number of markets. Increased sales and marketing activity, expanded local geographic footprints and differentiated brand portfolios drove performance, underpinned by favourable economic conditions. Soft drinks volumes grew by 11% on an organic basis. EBITA grew by 15% (16% on an organic, constant currency basis), mainly as a result of volume growth, pricing and mix benefits, our cost initiatives and the raw material cost benefits of local agricultural programmes. These were partly offset by higher sales and marketing investment, inflationary pressures and currency weakness.
- Asia Pacific lager volumes increased by 4% on an organic basis, with reported volumes significantly higher as a result both of the inclusion of Foster's since 16 December 2011 and of acquisitions in China. Reported EBITA grew by 247% mainly due to the addition of Foster's. On an organic, constant currency basis, EBITA grew by 30% with good growth in both China and India. Lager volumes grew by 4% on an organic basis in China with reported volumes up 9% boosted by acquisitions, and EBITA also grew strongly. India lager volumes grew by 3%. In Australia, our Pacific Beverages joint venture delivered strong volume growth on an organic basis up to January 2012 when the business was integrated into the newly acquired Foster's. On a pro forma(1) basis, CUB(1) full year lager volumes in Australia were 4% below the prior year, largely due to subdued consumer sentiment. EBITA also declined on a pro forma basis as a result of the lower volumes and increased commercial investment.
- South Africa: Beverages saw lager volumes grow by 2%, with particularly good performance in the peak season. Sustained brand investment and improvements in retail execution and customer service ensured market share gains by the end of the year, and ongoing growth in the premium segment. Soft drinks volumes also increased by 2%, benefiting from focused channel plans and better weather. Reported EBITA grew by 9% (14% on a constant currency basis) with EBITA margin expansion of 100 bps, benefiting from price and mix favourability, and with supply chain productivity offsetting the impact of increasing raw material costs. Continuing focus on reducing operating costs enabled the business to fund higher market-facing investments to support brands.
We have seen further progress in our business capability programme, particularly in the area of procurement. Net operating benefits from the programme again exceeded our expectations reaching US$159 million for the year with the most significant contributions from Trinity (global procurement), European regional manufacturing and sales and distribution systems in Latin America. The programme's working capital objective of US$350 million accumulated inflow was exceeded by over US$100 million in the prior year and these benefits have been sustained and extended through the year to 31 March 2012. Based on plans to extend the scope and depth of globally-managed procurement in particular, the group expects that net operating benefits will reach US$250 million in the year to 31 March 2013 (previous guidance US$200 million) and US$400 million in the financial year ending 31 March 2014 (previous guidance US$300 million), reaching a run rate of approximately US$450 million by the end of that year.
The global IS solution has been further developed during the year and was deployed in Ecuador in November 2011, covering back, middle and front office processes. The next full scope deployment will be in one of our largest and most sophisticated businesses, Poland. Refocusing of our IS resources on development work for core sales and distribution business models has led to the acceleration of some programme spend. Exceptional costs were US$235 million in the year and are expected to fall to around US$140 million in the year to 31 March 2013, with a further reduction in the year to 31 March 2014, the final year of the programme.
(1)CUB pro forma volumes and financial information are based on results for CUB reported under IFRS for the period from 1 April 2010 to 31 March 2011. Adjustments have been made to reflect SABMiller group accounting policies. CUB (Carlton and United Breweries) is the Australian beverage business of the recently acquired Foster's group.
Trading conditions are expected to be broadly unchanged with further growth in our developing markets but no more than modest improvements in consumer spending in some more developed economies. We will continue to develop and differentiate our brand portfolios, taking opportunities to improve sales mix and raise prices selectively. Unit input costs are expected to rise in mid-single digits in constant currency terms. Focus will be maintained on cost effectiveness, including synergy delivery in Australia, and on expanding our globally-managed procurement programmes. While healthy cash generation will again be a priority, targeted investments in production capacity, marketing and sales capability and business systems will continue in order to drive medium term growth.
|SABMiller plc||Tel: +44 20 7659 0100|
|Sue Clark||Director of Corporate Affairs||Tel: +44 20 7659 0184|
|Gary Leibowitz||Senior Vice President, Investor Relations||Tel: +44 20 7659 0119|
|Nigel Fairbrass||Head of Global Communications||Mob: +44 77 9989 4265|
A live audiocast of the management presentation to the investment community will begin at 9.30am (BST) on 24 May 2012. Access details for this audiocast, video interviews with management and copies of this announcement and the slide presentation are available on the SABMiller plc website at www.sabmiller.com.
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Copies of the press release and detailed Preliminary Announcement are available from the Company Secretary at the Registered Office, or from 2 Jan Smuts Avenue, Johannesburg, South Africa.