Termination of Amstel brand licence
13 March 2007
SABMiller’s subsidiary, The South African Breweries Limited, (“SAB” or “the company”), has been given notice by Heineken that it is terminating SAB’s licence to manufacture and distribute Amstel Lager with immediate effect.
This move follows a private arbitration held recently to determine whether Heineken was entitled to terminate the Amstel trade mark licence. The arbitration panel found that SABMiller’s transaction in South America in 2005 constituted a material change in shareholding of the SABMiller group which could be regarded as inimical to the interests of the Heineken group, thus giving rise to the right to terminate the licence.
SAB will consequently move to bolster its competitive position in the South African premium segment by drawing upon SABMiller’s global portfolio of brands and the wealth of experience and expertise it has built up in the market. The company is already pursuing a number of initiatives which will mitigate the impact of the licence termination, including extending SAB’s reach into direct distribution and broadening its premium offerings. The bulk of Amstel’s sales, like most beer sales in South Africa, are in returnable bottles, requiring a capability which SAB is uniquely positioned to provide.
Sales volumes of Amstel currently represent approximately 2.3mhl or 9% of beer sales volumes in South Africa. The sales of the Amstel brand will constitute approximately US$300m of SA Beverages’ revenues for the year ending 31 March 2007 based on an average exchange rate of ZAR7.03 = US$1.00. SABMiller estimates that any impact on the group’s earnings in the current financial year will be immaterial.
For the 2008 financial year, and going forward, the company expects to mitigate the financial impact on its earnings of the Amstel licence termination through the actions and initiatives referred to above. Nevertheless there will still be a negative financial impact. In the current financial year, on a pro-forma basis, SABMiller expects that this would have been some US$80m of EBITA, equivalent to pro-forma earnings of approximately 3.0 US cents per SABMiller share. SABMiller would expect the impact in the next financial year to be of the same order.
Commenting on the termination of the licence, Graham Mackay, SABMiller chief executive, said:
“Whilst we are surprised by the outcome of the arbitration, our consumers remain our first priority and we are confident of our continuing ability to provide them with a comprehensive choice of superior and differentiated brands, backed by our strong marketing and distribution capabilities.”
Notes to editors
About SABMiller plc
SABMiller plc is one of the world’s largest brewers with brewing interests or distribution agreements in over 60 countries across six continents. The group’s brands include premium international beers such as Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as an exceptional range of market leading local brands. Outside the USA, SABMiller plc is also one of the largest bottlers of Coca-Cola products in the world.
In the year ended 31 March 2006, the group reported US$15,307 million in revenue and profit before tax of $2,453 million. SABMiller plc is listed on the London and Johannesburg stock exchanges.
This announcement can be found on www.sabmiller.com
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