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Interim results F11: Strong financial performance and margin improvement

18 November 2010

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 2010.

Operational Highlights

  • Lager volumes increase 1% on an organic basis with growth in Asia, Africa and South Africa
  • Reported group revenue up 7%, with organic, constant currency revenue growth of 4%
  • EBITA margin increases by 90 basis points (bps) to 17.3%
  • Reported EBITA up 13%, with organic, constant currency EBITA growth of 10%:
    • Latin America EBITA1 growth of 10% due to lower raw material and fixed costs
    • Europe EBITA1 falls by 4% due to volume decline and downtrading
    • North America EBITA1 grows 27% as firm pricing and synergies more than offset volume declines
    • Africa EBITA1 up 11% benefiting from volume growth following capacity expansion
    • Asia EBITA1 up 22% as strong CR Snow volumes in China grow ahead of the market
    • South Africa Beverages EBITA1 up 8% due to volume growth and raw material cost benefits
  • Adjusted earnings up 19%, with adjusted EPS up 16%
  • Continued improvement in free cash flow2, up 23% to US$1,244 million

1 EBITA growth is shown on an organic, constant currency basis.
2 As defined in the financial definitions section. See also note 10b.

 6 months
to Sept 2010

6 months to Sept
12 months
to March
  1. Group revenue includes the attributable share of associates’ and joint ventures’ revenue of US$4,785 million (i.e. including MillerCoors’ revenue) (2009: US$4,509 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$282 million (2009: US$253 million) and share of associates’ and joint ventures’ net finance costs of US$17 million (2009: US$14 million).
  5. Profit before tax includes exceptional charges of US$285 million (2009: US$239 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 revenuea14,23613,355726,350
Revenueb (excludes associates’ and joint ventures’ revenue)9,4518,846718,020
Adjusted profit before taxd2,1671,920133,803
Profit before taxe1,6901,498132,929
Adjusted earningsf1,4651,236192,509
Adjusted earnings per share     
- US cents93.080.016161.1
- UK pence61.349.923100.6
- SA cents690.4648.961,253.8
Basic earnings per share (US cents)71.263.013122.6
Interim dividend per share (US cents)19.517.015 
Free cash flow1,2441,010232,028

Chief Executive's review

Graham Mackay, Chief Executive of SABMiller, said:

“In trading conditions which remained mixed across our markets, the group benefited from its global spread of businesses, delivering a strong financial performance. The strength of our brands, which supported price increases taken largely in the prior year, contributed to good revenue growth. Cost reductions, driven by lower raw material input costs and further fixed cost efficiencies, helped to finance increased investment behind our brand portfolios and assisted margin enhancement. Our financial position remains robust, with a further improvement in free cash flow.”

Organic, constant
Latin America6761910
North America4802727
South Africa: Beverages394188
South Africa: Hotels and Gaming63197

Business review

While trading and economic conditions across our markets remained mixed during the first half of the financial year, our financial performance was strong. Lager volumes were up 1% on an organic basis with good volume growth in Africa, China and South Africa, predominantly in the second quarter. Group revenue increased by 7%, 4% on an organic, constant currency basis, benefiting from higher sales volumes and price increases mainly taken in the second half of the prior year.

EBITA of US$2,466 million represented growth of 13%, 10% on an organic, constant currency basis, as key operating currencies strengthened against the US dollar compared to the equivalent period in the prior year. The group’s EBITA margin expanded by 90 bps to 17.3%. In addition to the pricing benefits noted above, the group’s half year results benefited from a reduction in overall raw material input costs, largely as a result of lower brewing raw material costs and favourable year on year foreign currency movements in some key markets. Marketing costs were higher as we continued to invest to build and support our brands, but we benefited from fixed cost efficiencies.

Adjusted earnings were 19% higher than the same period last year. Finance costs were up on the prior year but the group’s effective tax rate for the period of 29.0% was 40 bps lower than the prior year. Profit attributable to non-controlling interests was reduced by the purchase in May 2009 of the 28.1% non-controlling interest in our Polish subsidiary Kompania Piwowarska SA.

Free cash flow of US$1,244 million was US$234 million ahead of a strong prior year comparative. Capital expenditure of US$565 million was US$163 million lower mainly as a result of the completion of capacity expansion projects in Africa and reduced capital expenditure in Europe. Good working capital management generated an inflow of US$90 million. Normalised EBITDA margin which includes revenue and dividends from MillerCoors, and the cash impact of exceptional charges, improved 130 bps during the period.

The group’s gearing ratio at 30 September 2010 reduced to 36.8% from 40.8% at 31 March 2010. Group net debt fell by US$460 million to US$7,938 million. An interim dividend of 19.5 US cents per share, up 2.5 US cents from the prior year, will be paid to shareholders on 10 December 2010.

  • In Latin America, EBITA grew by 19% (10% on an organic constant currency basis), as reported results benefited from the strengthening of key regional currencies, with lager volumes marginally lower than the prior year. Price increases implemented mainly in the second half of the prior year, reduced raw material input costs and ongoing focus on reducing fixed costs were key contributors to the EBITA growth. We continued to develop our brand portfolio, identify new consumption occasions and increase the appeal of the lager category, as well as enhancing our route to market and geographic coverage. Colombia lager volumes fell by 7% following the February 2010 price increase to recover the emergency sales tax increase on beer, along with poor weather and five ‘dry days’ around presidential elections during the half year. Peru saw lager volume growth of 11% driven by effective sales execution and brand marketing activations in a strong economy.
  • In Europe, lager volumes fell 5%, with a very challenging first quarter partly offset by the benefit of favourable weather conditions in the second quarter. Economic and industry conditions remained difficult across most of the region, adversely impacting consumer spending and beer consumption, as well as driving further downtrading. EBITA was down 7% (4% in constant currency) due mainly to the volume decline and some adverse sales mix and higher marketing investment, partially offset by cost efficiencies and reduced raw material costs.
  • In North America EBITA grew by 27% despite a 3% decline in MillerCoors’ sales to wholesalers (STWs) compared to the prior year. MillerCoors’ domestic sales to retailers (STRs) were also down 3% as declines in the premium light and below premium segments were only partially offset by good growth in the recently established Tenth and Blake crafts and imports division. The impact of revenue management benefits, innovation and continued realisation of synergies and cost savings drove MillerCoors EBITA up by 21%.  
  • Lager volumes in Africa grew by 11% on an organic basis, and by 7% excluding Zimbabwe1. Uganda, Mozambique, Zambia and Angola all saw strong lager volume growth following capacity expansions, with Tanzania volumes level with the prior period even though the comparable period included other licensed brands which have now been withdrawn. Soft drinks volumes grew by 5% (1% excluding Zimbabwe) on an organic basis, with volumes level in Angola. EBITA was 5% higher (11% on an organic, constant currency basis) due to the strong volume performance, partially offset by the impact of weaker local currencies on raw material costs and higher capacity-related fixed costs. Our strategy to further diversify the range and mix of beverages continues, and we have seen good performances from local and regional premium brands, as well as our water and other non-alcohol categories.  
  • Asia lager volumes grew 10% on an organic basis, with both reported and organic, constant currency EBITA growing by 22%. Our China associate CR Snow saw strong growth with lager volumes up 9% on an organic basis, which was ahead of the market. Particularly good growth came from CR Snow’s two largest regions, the north-east and central, as the Snow brand continues its momentum. India saw strong lager volume growth, cycling a low prior year base impacted by regulatory issues in Andhra Pradesh and Uttar Pradesh, although new trading restrictions have arisen in the current year.
  • South Africa benefited from strong brand building and retail execution activities, with lager volumes increasing by 3% in a growing market. The lack of an Easter peak in the current year was partially offset by higher volumes around the FIFA World Cup. Soft drinks volumes also increased by 3%, driven by our refocused growth strategy and favourable weather conditions in the latter part of the first half of the year. EBITA grew by 18%, and was up 8% in constant currency. EBITA growth was driven primarily by volume growth across both the beer and soft drinks businesses. Lower brewing raw material costs and the stronger rand also contributed to the EBITA expansion. We have grown our sales capability and marketing investment in order to support and build our key lager brands in a competitive environment, with specific campaigns having been focused around the 2010 FIFA World Cup period.
  • We have made good progress across the range of our business capability initiatives including global procurement, regional manufacturing and the design and first implementations of major systems platforms. The outlook for cost savings and efficiency benefits is in line with original expectations. However, higher design and implementation costs, an extension to the programme timeline and enhanced scope will increase exceptional costs by approximately US$160 million, with potentially a further US$40 million from adverse exchange rate movements. Following an exceptional charge of US$342 million last year, we expect the charge in the current year to decline by about 15%. Charges will decline from this level by about 40% year on year in each of the financial years 2012 and 2013, with a final charge in financial year 2014 similar to that in the 2013 financial year. The factors above are also expected to result in additional capital expenditure of about US$100 million over the five years of the programme, however programme working capital inflows have already exceeded the US$350 million target originally expected to be met in financial year 2012.

1 We have included our share of Delta, our associate in Zimbabwe, within our results effective 1 April 2010 following the effective ‘dollarisation’ of the economy in 2009, the end of hyper-inflation and the stabilisation of the local economy.


Although consumer spending remains subdued, the trend of incremental improvement in economic conditions across most of our emerging markets is expected to be maintained. We will continue to increase prices selectively, and will benefit from lower raw material costs and our productivity and efficiency initiatives but at a more moderate rate than in the first six months of the year. We are increasing investment behind our brands to ensure that we are well placed to benefit from an improvement in trading conditions.

Download the full Interim F11 announcement PDF 0.39Mb

SABMiller plc Tel: +44 20 7659 0100
Sue Clark Director of Corporate AffairsTel: +44 20 7659 0184
Gary Leibowitz Senior Vice President, Investor RelationsTel: +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 18 November 2010.

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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