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Interim results F12: Strong developing market performance drives sales and earnings growth

17 November 2011

SABMiller plc, one of the world’s leading brewers with operations and distribution agreements across six continents, today reports its interim (unaudited) results for the six months to 30 September 2011.

Operational Highlights

  • Lager volumes increase 3% on an organic basis led by robust growth in Latin America, Africa and Asia
  • Reported group revenue up 10%, with organic, constant currency revenue growth of 6%
  • Reported EBITA up 10%, with organic, constant currency EBITA up 6%:
    • Latin America EBITA1 up 16% reflecting good volume growth, positive mix and fixed cost efficiencies
    • Europe EBITA1 down 6% constrained by challenging economic and market conditions
    • North America EBITA1 down by 6% reflecting lower volumes and higher costs
    • Africa EBITA1 up 23% benefiting from strong volume growth and price and mix benefits
    • Asia EBITA1 up 29% reflecting higher profits in China
    • South Africa Beverages EBITA1 up 8% driven by price and mix benefits
  • Adjusted earnings up 11% and adjusted EPS up 11% to 103.3 US cents per share
  • Continued improvement in free cash flow2, up 19% to US$1,479 million

1 Segmental EBITA growth is shown on an organic, constant currency basis.
2 As defined in the financial definitions section. See also note 9b.

Financial highlights 6 months to Sept
6 months
to Sept
% change 12 months to March
  1. Group revenue includes the attributable share of associates’ and joint ventures’ revenue of US$5,149 million (2010: US$4,785 million).
  2. Revenue excludes the attributable share of associates’ and joint ventures’ revenue.
  3. Note 2 provides a reconciliation of operating profit to EBITA which is defined as operating profit before exceptional items and amortisation of intangible assets (excluding software) but includes the group’s share of associates’ and joint ventures’ operating profit, on a similar basis. EBITA is used throughout this interim announcement.
  4. Adjusted profit before tax comprises EBITA less adjusted net finance costs of US$229 million (2010: US$282 million) and share of associates’ and joint ventures’ net finance costs of US$15 million (2010: US$17 million).
  5. Profit before tax includes exceptional charges of US$191 million (2010: US$285 million). Exceptional items are explained in note 3.
  6. A reconciliation of adjusted earnings to the statutory measure of profit attributable to equity shareholders is provided in note 5.
Group revenuea 15,688 14,236 10 28,311
Revenueb 10,539 9,451 12 19,408
EBITAc 2,701 2,466 10 5,044
Adjusted profit before taxd 2,457 2,167 13 4,491
Profit before taxe 2,041 1,690 21 3,626
Adjusted earningsf 1,633 1,465 11 3,018
Adjusted earnings per share        
- US cents 103.3 93.0 11 191.5
- UK pence 64.0 61.3 4 123.4
- SA cents 731.1 690.4 6 1,369.6
Basic earnings per share (US cents) 87.4 71.2 23 152.8
Interim dividend per share (US cents) 21.5 19.5 10  
Free cash flow 1,479 1,244 19 2,488

Chief Executive's review

Graham Mackay, Chief Executive of SABMiller, said:

“Top and bottom line growth has been strong in most of our developing market businesses, propelled by our continued investment in brands, sales and marketing capability and production capacity. Market conditions have remained challenging in the USA and much of Europe and increases in input costs have continued, as expected. We have taken further steps to extend our global portfolio: our planned alliance with Anadolu Efes and recommended proposal to acquire Foster’s both represent strategically important moves into attractive markets.”

Segmental EBITA performance Sept
2011  EBITA
Organic, constant
Latin America 797 18 16
Europe 570 4 (6)
North America 452 (6) (6)
Africa 327 27 23
Asia 138 26 29
South Africa: Beverages 446 13 8
South Africa: Hotels and Gaming 67 5 -
Corporate (96) - -
Group 2,701 10 6

Business review

The group delivered a good financial performance in trading conditions which remained mixed across our markets. Latin America, Africa and Asia delivered good volume growth reflecting the strength of our brands and sales execution against a backdrop of increasing consumer expenditure. Conversely, in the USA and Europe, consumer markets remain weak. Trading conditions in Europe were also affected by competitor price reductions and intensified marketing investment and promotional activity, particularly in the economy segment.

Total beverage volumes were 3% ahead of the prior year on an organic basis with lager volumes up 3% and soft drinks volumes up 6%. This volume growth, some mix benefits and selective pricing drove group revenue up by 10%, 6% on an organic, constant currency basis with revenue per hectolitre up 3% on the same basis.   

EBITA of US$2,701 million rose by 10% or by 6% on an organic, constant currency basis.  As anticipated, raw material input costs rose by low single digits (on a constant currency, per hl basis), reflecting higher raw material and packaging costs.  Marketing spend was increased in line with revenue to support brand development, particularly in growing markets. Fixed costs increased, reflecting additional spend to support sales, marketing and system capabilities across our operations and the corporate centre.  Corporate costs were also affected by adverse foreign exchange movements.  These increases were partly offset by productivity initiatives across the business.  The group’s EBITA margin reduced by 10 basis points (bps) to 17.2%.

Adjusted earnings increased by 11% as a result of the higher EBITA, lower finance costs and a slight reduction in effective tax rate to 28.5%. Adjusted earnings per share were also up 11% to 103.3 US cents.  The results benefited from the strength of key operating currencies against the US dollar compared with the prior year.

Free cash flow increased by US$235 million over the prior year to US$1,479 million. Adjusted EBITDA, which includes dividends from MillerCoors but excludes the cash impact of exceptional charges, increased by US$187 million. Capital expenditure, including intangible assets, of US$760 million was US$146 million higher than the prior period. We selectively invested to support future business growth and developed our IT systems as part of our business capability programme. Working capital improvements generated a cash inflow of US$71 million, marginally lower than the prior period. Net interest paid was US$145 million lower than the prior period mainly reflecting reduced net debt.

The group’s gearing ratio as at 30 September 2011 reduced to 28.9% from 31.2% as at 31 March 2011. Group net debt fell by US$608 million to US$6,483 million. An interim dividend of 21.5 US cents per share, up 2.0 US cents (10%) from the prior year, will be paid to shareholders on 9 December 2011.

  • Latin America delivered strong volume growth with lager volumes up 8% on an organic basis and soft drinks volumes up 12% supported by brand and pack portfolio enhancements. EBITA grew by 18% (16% on an organic, constant currency basis) and margin improved by 80 bps reflecting a combination of volume growth, price and mix benefits and continuing fixed cost productivity initiatives. In Colombia, lager volumes grew 7% benefiting from a strategy of price restraint, improved trade execution, a healthy economy and a relatively weak prior year comparative. In Peru, lager volumes grew 11%, underpinned by gains in market share, the successful repositioning of Pilsen Callao in the upper mainstream segment and a buoyant economy.
  • In Europe, lager volumes were in line with the prior year in a region impacted by competitor price reductions and intensified marketing and promotional activity, particularly in the economy segment, and weakened consumer demand. We maintained revenue per hl in line with the prior period with moderate price increases where possible, and tactical discounting where required, in response to competitor net price reductions. Reported EBITA grew by 4%, but declined by 6% on an organic, constant currency basis reflecting negative sales mix and increased raw material costs. Volumes in the Czech Republic declined 1% as the market was impacted by weakened consumer demand and adverse weather in July. Volumes in Poland declined 2%, and volumes in Romania declined 8%, as both markets were impacted by intensified competition, continued downtrading and fragile consumer environments. Volumes in Russia grew 3%, with growth in the first quarter partly offset by a decline in the second quarter, cycling an exceptionally hot summer in the prior year.
  • In North America, MillerCoors’ domestic sales to retailers (STRs) were down 2% driven by a weak economy and low consumer spending. Sales to wholesalers (STWs) were down 4%, declining by more than STRs due to the timing of shipments in the prior year. Strong volume growth of the Tenth and Blake crafts and imports division was more than offset by volume declines in both the premium light and below premium segments. Lower volumes, rising input commodity costs and higher fixed costs offset revenue management to result in a 6% decline in North America EBITA.   
  • Lager volumes in Africa grew 15% on an organic basis with robust growth continuing across the region. Reported EBITA increased by 27% (23% on an organic, constant currency basis) and margin improved by 60bps as we continued to benefit from improved operating leverage. In Tanzania, lager volumes grew 20% as market share gains were driven through increased refrigeration at the point of sale, enhanced outlet branding and improvements in distribution. Lager volumes in Mozambique, Uganda and Zambia all exhibited strong growth underpinned by our increased market penetration and strong local brand portfolios. Our associate Castel grew lager volumes by 11% on an organic basis with good performance in the Democratic Republic of Congo and Cameroon. Soft drinks volumes grew by 10% on an organic basis driven by solid performances in Zimbabwe, Ghana and South Sudan.
  • Asia’s lager volumes grew 9% including the benefits of regional acquisitions in China, and grew 4% on an organic basis. Reported EBITA increased by 26% (29% on an organic, constant currency basis) driven mainly by higher profitability in China following price increases introduced in the prior year. Our China associate, CR Snow, continued to deliver good growth with reported lager volumes up 10% (5% on an organic basis), with all regions contributing. In India, volumes declined 7%, impacted by excise increases at the start of the year and trading restrictions in Andhra Pradesh, although these were lifted at the end of the half year.
  • South Africa Beverages held lager volumes in line with the prior year.  Although volumes benefited from an Easter peak in the first quarter, growth was constrained by weak consumer demand and the cycling of the impact of the 2010 FIFA World Cup in the prior period. Soft drinks volumes declined by 3%, cycling strong growth in the second quarter of the prior year and the effects of much colder and wetter weather in the current year. Despite the lower volumes, reported EBITA grew 13% (8% on a constant currency basis) and margin expanded 50 bps as a result of mix and pricing benefits from our local beer brands. The business maintained its focus on improving productivity and reducing operating costs allowing an increase in market-facing investment behind core brands.
  • The business capability programme continues to progress, with cumulative net operating benefits worth US$60 million in the first six months of the year.  These mainly reflect an expanding range of procurement initiatives together with efficiency gains and fixed costs savings from the European manufacturing project, partly offset by the higher operating expenses of the new IT systems.  Exceptional costs of US$115 million in the period reflect spend on the development of the global systems template and preparation for its deployment in Ecuador in November.
  • In September, we announced that we had agreed with Foster’s Group Limited a recommended proposal to acquire Foster’s for cash in a transaction which represents an acquisition enterprise value of A$11.5 billion.   The proposed acquisition of Foster’s is consistent with our strategic priorities and will provide 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 proposed acquisition is to be implemented by means of a scheme of arrangement, and subject to receiving all necessary regulatory and court approvals, and the approval of Foster's shareholders at meetings which have now been convened for 1 December 2011, we expect to complete the acquisition on 16 December 2011. We announced in June that we had separately reached agreement with Coca-Cola Amatil Limited to acquire their share of the Pacific Beverages joint venture in Australia once we complete the Foster's acquisition. 
  • In October, we announced our intention to form a strategic alliance with Anadolu Efes. We will transfer our Russian and Ukrainian beer businesses to Anadolu Efes, and we will take a 24% equity stake in the enlarged group, which will be the vehicle for both groups’ investments in Turkey, Russia, the CIS, Central Asia and the Middle East. The alliance will result in the enlarged Anadolu Efes strengthening its market position to become the number two brewer, in value terms, in the large Russian beer market. It is already the leading beverage producer in Turkey, with 89% of the beer market and a 69% share of the carbonated soft drinks market, and it has leading market positions in the growth beer markets of Kazakhstan, Moldova and Georgia. Subject to finalisation of the definitive legal agreements and relevant regulatory approvals, we expect to complete the transaction before the end of the financial year.


We expect trading conditions experienced in the first half to continue through the remainder of the year. Economic and market environments in the USA and Europe are expected to remain difficult with generally favourable conditions elsewhere, particularly in Latin America and Africa. 

Price increases will be taken selectively during the second half, taking into account the competitive environment and our strategy to achieve growth through affordability in some markets. Compared with the first half of the current financial year, raw material input costs are expected to increase at a slightly faster rate in the second half and as we enter the following year; we continue to expect increases for the full year to be in the low single digits range.  Increased investment to support our brand portfolios, sales capabilities and IT will continue, balanced by initiatives to reduce costs and increase efficiency. 

After a strong start to the year, the South African rand and some other key operating currencies have recently weakened against the US dollar.  Our financial position is strong and we look forward to completing our acquisition of Foster’s and finalising our alliance with Anadolu Efes.

Download the full Interim F12 announcement PDF 0.44Mb

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 Media Relations Mob: +44 77 9989 4265

A live audiocast of the management presentation to the investment community will begin at 9.30am (GMT) on 17 November 2011.

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

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Copies of the press release and detailed Interim Announcement are available from the Company Secretary at the Registered Office, or from 2 Jan Smuts Avenue, Johannesburg, South Africa.

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