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The South African Breweries Grows Total Volumes In ‘Tough’ Trading Environment

14 May 2009

SABMiller plc have just released their preliminary results on SENS.  Please find attached a release focusing specifically on SAB Ltd, the South African subsidiary of SABMiller.
Any SAB Ltd related media queries should please be directed to Dominique van Onselen on 082 802 8184.

Johannesburg, Thursday 14 May 2009, Following the release of SABMiller plc's preliminary results for the period to end March 2009, the South African Breweries Limited (SAB) has announced a solid performance with a volume trend in line with expectations.
In an economic environment marked by consumer spending hampered by high interest rates and high fuel prices, SAB's revenue grew by 11% on a constant currency basis. EBITA declined by 8% on a constant currency basis due to increased commodity and energy costs and higher inflation, which in turn increased production costs per hectolitre in ZAR by 23%.  EBITA was also adversely impacted by the reversal of foreign currency gains booked in the prior financial year on procurement. The EBITA margin declined to 19.3%, although this was an improvement on the half-year margin.
Lager volumes were down 2%, largely affected by the absence of Easter trading in the reporting period, a decline in both premium and flavoured alcoholic beverage volumes and regional regulatory impacts. The mainstream category, which accounts for the vast majority of total lager sales, remained in growth supported by strong performances by both Hansa Pilsener and Castle Lager. 
Soft drinks performed particularly well with volumes growing by 4%, buoyed by strong growth in sparkling soft drinks. This outweighed a marginal decline in alternative beverages following the discontinuation of a number of low margin fruit cordial brands.  Market share grew following the launch of Coke Zero and flavoured Sparletta brands. 
The weakening of the ZAR compounded the impact of commodity price increases. Distribution costs were contained to a marginal increase due to improvements in distribution efficiencies which offset higher fuel costs. The company's Calabash project, which involved the replacement of the mainstream bottle pool, was completed in September and resulted in increased container depreciation.
Two premium lager brands, Grolsch and Dreher, were launched in the first half of the year, together with a new premium dry apple ale, Blakes and Doyle, which expanded SAB's premium and FAB brand portfolios.  During the year, new pack designs were introduced for Brutal Fruit, upgraded pack designs for Miller Genuine Draft, new artwork was introduced for Castle Milk Stout, while Hansa Marzen Gold and Hansa Pilsener packaging were aligned. 
Managing Director Norman Adami said that the tougher trading environment provided even more impetus to the company's new strategic direction and imperatives. "We understand the issues, and have modified our strategy accordingly.  We are now moving to execute that strategy."
In March the company presented its five-pronged strategy to analysts: these include focusing on strengthening the company's productivity edge, engaging the competition effectively, ensuring its key brands resonate, shaping superior routes to market and entrenching SAB's position as a progressive societal leader.
"The South African market has great potential despite current economic pressures.  We have managed our way through numerous economic cycles, and are fully equipped to do so this time too."
Adami said that there was also every reason for optimism in the company's soft drinks division which was set for good growth.  Taken together with SAB's focused attention on fixing out of stocks which resulted in 20% and 30% growth in December 2008 and January 2009, the company was working closely together with Coca Cola South Africa to shape the retail landscape.
For further information, please contact Janine van Stolk on 082 924 2267 or Dominique van Onselen on 082 802 8184.

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