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Interim results F10: Strong underlying operational performance

19 November 2009

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 2009.

Operational Highlights

  • Lager volumes decrease 1% on an organic basis with growth in Africa and Asia offset by weaker volumes in other markets
  • Reported group revenue down 6% and reported EBITA down 2% impacted by weakness of our major operating currencies against the US dollar compared with the same period last year
  • Firm pricing and cost efficiency drives organic, constant currency group revenue growth of 3%, EBITA growth of 11% and margin growth of 110 bps
  • EBITA on an organic, constant currency basis increases across all regions despite mixed volume performance:
    - Pricing benefits and cost efficiencies in Latin America drive excellent EBITA(1) growth of 33%
    - Solid pricing in Europe supports a 5% increase in EBITA(1) despite volume decline
    - North America EBITA(1)  grows 7% as cost synergies are realised
    - Africa EBITA(1)  up 15%, driven by volume growth and pricing
    - Asia EBITA(1)  up 29% as CR Snow volumes in China grow at more than double the market rate
    - South Africa Beverages EBITA(1) up 4% despite weaker consumer spending and increased marketing spend
  • Free cash flow(2) improves by US$1,124 million compared with the prior year period

(1) EBITA growth is shown on an organic, constant currency basis.
(2) As defined in the Financial Definitions section. See also note 9b.

% changeMarch
  • (a) Group revenue includes the attributable share of associates’ and joint ventures’ revenue of US$4,509 million (i.e. including MillerCoors’ revenue) (2008: US$3,056 million).
  • (b) Revenue excludes the attributable share of associates’ and joint ventures’ revenue. 2009 is not comparable with 2008 as MillerCoors’ revenue is not included in 2009, although Miller Brewing Company’s revenue is included in 2008.
  • (c) 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 the interim announcement.
  • (d) Adjusted profit before tax comprises EBITA less adjusted net finance costs of US$253 million (2008: US$358 million) and share of associates’ and joint ventures’ net finance costs of US$14 million (2008: US$7 million).
  • (e) Profit before tax includes exceptional charges of US$239 million (2008: exceptional credits of US$371 million).
  • (f) A reconciliation of adjusted earnings to the statutory measure of profit attributable to equity shareholders is provided in note 5.
Group revenue (a)13,35514,222(6)25,302
Revenue (b) (excludes associates’ and joint ventures’ revenue)8,84611,166(21)18,703
EBITA (c)2,1872,225(2)4,129
Adjusted profit before tax (d)1,9201,86033,405
Profit before tax(e)1,4982,020(26)2,958
Adjusted earnings (f)1,2361,128102,065
Adjusted earnings per share     
- US cents80.075.26137.5
- UK pence49.938.92879.7
- SA cents648.9585.8101,218.6
Basic earnings per share (US cents)63.094.8(34)125.2
Interim dividend per share (US cents)17.016.06 

Chief Executive's review

Graham Mackay, Chief Executive of SABMiller, said:

"In some of the toughest economic conditions seen for decades, we have continued to take share in a number of markets.  The weakness of our major operating currencies against the US dollar has affected reported results, but we have continued to generate a strong underlying performance.  The actions we have taken to position our business globally, to invest in brands and to develop our operational capabilities will continue to underpin our long term growth.”

Organic, constant
Latin America 5661933
Europe 590(19)5
North America 37977
Africa 246315
Asia 902429
South Africa: Beverages33304
South Africa: Hotels and Gaming53(12)(16)

Business review

Our underlying performance has been strong although difficult trading conditions persisted across most markets.  Lager volumes were down 1% on an organic basis, but our market execution and the strength of our brands enabled us to continue to gain share across many of our key markets.  Group revenue increased by 3% organically in constant currency, supported by price increases taken predominantly in the second half of the prior year. 

Despite the slight decline in volumes, EBITA performance was strong, growing 11% on an organic, constant currency basis with the group’s EBITA margin improving 110 basis points (bps) to 16.8%.  The benefits of falling commodity prices are not yet fully reflected in our costs, due to the long term nature of our raw material supply contracts and the relative strength of the US dollar in which many of these contracts are priced.  Greater efficiencies in our marketing spend, combined with cost reductions and restructuring in certain markets, continued to benefit our cost base.  On a reported basis, EBITA of US$2,187 million declined 2% reflecting significantly weaker operating currencies against the US dollar compared to the same period in the prior year.

Although reported EBITA was lower, adjusted earnings grew 10% due to lower finance charges and reduced profit attributable to minority interests following the purchase of the 28.1% minority interest in our Polish subsidiary Kompania Piwowarska in May 2009 in exchange for the issue of 60 million ordinary shares.  The group’s effective tax rate for the period was 29.4%, compared with 31.0% in the same period in the prior year.

Free cash flow of US$998 million showed an improvement of US$1,124 million compared to the same period last year.  Capital expenditure was US$517 million lower than in the prior year period following the completion of several major investments.  Improved working capital management delivered cash inflow of US$300 million, US$638 million better than in the prior year period.  Normalised EBITDA margin, including both dividends and revenue from MillerCoors, improved 30 bps during the period. 

The group’s gearing ratio at 30 September reduced to 47.0% from 54.0% (restated) at the previous year end.  An interim dividend of 17 US cents per share, up 1 US cent from the prior year, will be paid to shareholders on 11 December 2009.

  • In Latin America, despite local currency devaluation, EBITA grew 19% (33% on an organic, constant currency basis) reflecting strong pricing, principally in the second half of the prior year, and cost reduction.  Lager volumes fell 1% as economic pressures, combined with political and social unrest in some countries, impacted beer markets across the region.  We continued to focus on expanding the appeal, availability and affordability of the beer category.  In Colombia, lager volumes were 2% below the prior year period which benefited from increased sales in September 2008 ahead of a 1 October price increase.  Our share of the alcohol market continued to increase aided by strong performance of our premium brands.  Against prior year comparative growth of 10%, Peru’s lager volumes declined 2%, but market share increased in a market that declined 7%.     
  • In Europe, lager volumes declined 6% on an organic basis, with depressed consumer spending leading to a contraction in beer consumption across the region.  With key exchange rates much weaker than last year, EBITA declined 19% but grew 5% on an organic, constant currency basis.  Strong pricing drove organic, constant currency revenue per hectolitre growth of 6% and further cost efficiencies more than offset higher depreciation and a 2% increase in variable production costs.  We gained market share in Poland, Romania and the UK, with strong momentum behind key brands.  In the Czech Republic volume share declined marginally, consistent with our value oriented strategy, and in Russia both volumes and market share fell, reflecting down-trading in the market and our focus on the premium segment.    
  • North America delivered reported EBITA growth of 7% despite lager volumes 5% below those reported last year.   On a pro forma(1) basis, MillerCoors US domestic volume sales to retailers (STRs) were down 1% for the half year driven by a slight decline in premium light volumes and continued softness in above premium and premium brands.  Domestic sales to wholesalers (STWs) were down 1% on a pro forma basis.  Strong revenue and cost management, and continued synergy delivery drove a 22% increase in MillerCoors EBITA on a pro forma basis.   
  • Africa lager volumes grew 3% on an organic basis with Uganda, Zambia and Mozambique all reporting good growth.  However, soft economic conditions contributed to reduced volumes in Tanzania, and Botswana continued to be impacted by the 30% social levy on alcoholic beverages imposed in November 2008.  Soft drink volumes grew 5% on an organic basis reflecting robust performance across the region.  EBITA grew 3%, held back by local currency weakness, but rose 15% on an organic, constant currency basis assisted by firm pricing.  We continue to implement our full beverage portfolio strategy, acquiring a water business in Ethiopia and a non-alcoholic beverage business in Zambia.  New local premium lager beers were introduced in five markets.  Capacity expansion projects in Uganda and Ghana have recently been completed, as has a new brewery in Southern Sudan.  New plants in Tanzania, Mozambique and Angola will be commissioned shortly. 
  • Asia lager volumes grew 9% on an organic basis and organic, constant currency EBITA grew 29%, while reported EBITA was up 24%.  This reflected a strong performance from CR Snow, our associate in China, which increased lager volumes by 15% in a market which grew by 6%.  Significant share gains were achieved in the key provinces of Anhui and Zhejiang, driven by the success of the Snow brand.  In Australia, our joint venture enjoyed strong growth in a flat market, driven by Peroni Nastro Azzurro, Miller Genuine Draft and Bluetongue.  India experienced a difficult first half, with volumes declining 21%, largely as a result of regulatory issues in the key states of Andhra Pradesh and Uttar Pradesh.
  • Lager volumes in South Africa declined by 3%, impacted by generally weak consumer spending.  As expected, our year on year market share fell.  EBITA was flat due to adverse exchange rates; however on a constant currency basis grew 4%.  Group revenue increased by 6% on a constant currency basis, benefiting from the price increases implemented in the prior year, more than offsetting higher input costs.  Fixed cost savings helped fund a substantial increase in sales and marketing investment in the beer business, with the core of the lager brand portfolio strengthened by new advertising campaigns and sponsorship of the Confederations Football Cup and the Lions rugby tour.  Soft drinks volumes were down 2%, in line with the market.  On 1 July, we announced preliminary details of a proposed broad-based black economic empowerment transaction in South Africa.  This will benefit employees, soft drink and liquor retailers and the wider South African community by enabling them to participate in the equity of The South African Breweries Limited.
  • The group has begun a major business capability programme that will simplify processes, reduce costs and allow local management teams to enhance focus on their markets.  Finance, human resources and procurement activities will be streamlined by deploying global information systems, establishing a global procurement operation and selectively outsourcing certain activities.  Sales, distribution and supply chain management processes will also be enhanced and moved onto common, regional systems platforms.  The programme is expected to take four years to complete with spend weighted to the start of the programme.  Exceptional costs of approximately US$370 million will be recognised in the current year's income statement (US$187 million in the first half) with costs lowering progressively by approximately 40% year on year in each of the financial years 2011 to 2013.  In addition to non-financial benefits, we expect cost and efficiency savings rising to approximately US$300 million per annum by the 2014 financial year and working capital inflows of approximately US$350 million which will largely be realised in the financial years 2010 to 2012.

(1) MillerCoors pro forma figures are based on results for Miller’s and Coors’ US and Puerto Rico operations reported under International Financial Reporting Standards (IFRS) and US GAAP respectively for the six months ended 30 September 2008.  Adjustments have been made to reflect both companies’ comparative data on a similar basis including amortisation of definite-life intangible assets, depreciation reflecting revisions to property, plant and equipment values and the exclusion of exceptional items.


Overall, we expect the current trading conditions to continue in the second half, as unemployment, retail spending and other consumer indicators lag the reported stabilisation of GDP in many of our markets. 

Our operational performance continues to be driven by the unique strength of our local brand portfolios which have enabled market share gains in spite of the significant price increases taken in the prior year.  Price rises will moderate in the coming months compared with last year. The margin trend delivered in the first half will be affected over the remainder of the year as the price increases and cost efficiencies achieved in the prior year are cycled.  Input costs continue to be affected by existing contractual obligations but will begin to ease towards the end of this year. 

We expect second half reported results to benefit from favourable currency movements, provided our major operating currencies remain at or near current exchange rates to the US dollar.  The group’s financial position remains strong and we are well positioned to take advantage of future improvements in the market environment.

Download the full Interim F10 announcement PDF 0.39Mb

SABMiller plc Tel:   +44 20 7659 0100
Sue Clark Director of Corporate AffairsMob: +44 20 7659 0184
Gary Leibowitz Senior Vice President, Investor RelationsMob: +44 20 7659 0119
Nigel Fairbrass Head of Media RelationsMob: +44 7799 894265

A live audiocast of the management presentation to the investment community will begin at 9.30am (GMT) on 19 November 2009.

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.

Registered office: SABMiller House, Church Street West, Woking, Surrey GU21 6HS
Incorporated in England and Wales (Registration Number 3528416)

Telephone: +44 1483 264000

Facsimile: +44 1483 264117

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