SAB Posts Strong Growth in Revenue and Profit in Six Months to End September 2012

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– SAB Beverages revenue grows 10% to R20.7-billion
– EBITA grows 11% to R3.5-billion
– Interim dividend of R46-million for Zenzele, SAB’s empowerment programme
– Lager volumes grow 1% to 12.44-million hl
– Market share gains were made in the highly competitive beer business
– Soft drinks volumes grow 8% to 7.8-million hl

Johannesburg, 22 November 2012: The South African Breweries posted strong gains in revenue and operating profit for the six months to end September 2012 as the continued focus on market facing investments and retail execution delivered positive results.

The improved performance was achieved despite a challenging operating environment, with weak economic growth, intensified competition and sluggish consumer spending. In addition, costs increased significantly due to a weaker rand, volatile commodity costs and a steep rise in excise.

SAB’s black economic empowerment scheme, Zenzele, benefitted from SAB’s stronger performance, with the company declaring an interim dividend of R46-million. This is the fifth dividend declared since the programme was launched in 2010, bringing the total dividends declared to date to R256-million.

SAB is made up of the beer business, soft drinks division ABI, Appletiser and a 29% stake in Distell.

SAB group revenue grew 10% to R20.7-billion on a constant currency basis from R18.9-billion previously.

EBITA grew by 11% to R3.5-billion from R3.2-billion previously and EBITA margins showed a 10 basis point improvement to 16.8% from 16.7% previously.

SAB Chairman and MD Norman Adami said: “Four years into our business strategy, we are in an increasingly strong commercial position and are delivering steady, profitable and sustainable growth. We achieved the improved performance despite significant challenges which included rising costs. I am proud of our achievements as a business.”

SAB Beer business

The lager business continued to gain market share, with lager volumes improving 1% to 12.44-million hectoliters (hl) from 12.29-million hl the previous year.

Key achievements during the review period include:

• Market share gains have continued to be made in a highly competitive market, with SAB having increased its share to almost 90%;
• The mainstream power brands – Castle, Carling Black Label and Hansa Pilsner – are continuing to collectively grow;
• Castle Lite continued to outperform its competition and gained additional market share in the premium segment, solidifying its position as the largest and fastest growing premium brand in the country;
• The repositioning of SAB’s three global brands – Grolsch, MGD and Peroni – is gaining traction under a specialized team;
• Innovation in product and packaging continues, with new packaging formats, merchandising and promotional programmes unveiled;
• SAB’s reach and intensity continued to improve with key customers, backed up by strong retail execution and customer service;
• The focus on tackling alcohol abuse remains a priority following the launch in 2009 of an innovative, multifaceted and multi-year strategy which aims to combat alcohol abuse and its negative effects on society. It covers numerous initiatives, one of which is underage drinking which is having an impact, with an independent study showing a drop in teens’ alcohol consumption in targeted areas, as well as a decrease in the amount of alcohol underage drinkers consumed on each occasion.

Soft drinks business

Soft drinks volumes grew strongly at 8% to 7.81-million hl from 7.24-million hl, benefitting from well co-ordinated and executed market activation. The use of innovative market level partnerships resulted in improved market penetration.

The performance followed the continued implementation of the growth strategy which focuses on improving customer service, investing in market-facing operating infrastructure and improving productivity throughout the supply chain.

The implementation of the strategy over the review period resulted in key successes, including:

• Inventive reward structures were used to penetrate key classes of trade, with benefits in particular for the 2l PET pack;
• Out-of-stocks continued to fall as a result of increased manufacturing capacity as well as improved frequency of deliveries and customer service levels;
• New customers continued to be added, with the outlet universe increasing by 12% to 9 700 during the review period;
• Improved delivery to customers in local and traditional classes of trade through the use of local market logistics partners (MLP’s). These are independent distributors who service smaller and traditional markets, with seven MLP’s added in the past six months to reach 62. Collectively, the MLP’s have created 600 new jobs in local communities;
• Investments in cold drinks fridges continued and increased 24% to 119 000.

Appletiser, which is 100% owned by SAB, achieved strong growth in volumes, revenue and profits. The company continued to benefit from the introduction of a new line-up of packaging options for the Appletiser and Grapetiser products which delivered strong growth in the marketplace.

Other Beverage Business

Distell posted revenue growth on a sales volume increase of 9.6%. EBITA fell 45% to R81-million from R148-million previously after providing for a R298-million once off adjustment for additional excise tax levied on certain products up to February 2011. This impacted negatively on SA Beverages, with its share of R87-million having been recorded in the half year under review.

Interim dividend of R46-million declared for Zenzele empowerment deal

SAB’s broad-based black economic empowerment transaction, SAB Zenzele, continued to deliver real, tangible benefits for shareholders, continuing to pay cash dividends which has been achieved from the first year. Based on SAB’s performance in the review period, the SAB Board has declared an interim dividend of R46-million up from R43-million for the same period last year in respect of the shares held by the SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited.

The SAB Foundation, which supports community based projects, will receive an interim dividend totalling R7.8-million, bringing to R45.4-million the total in dividends which have been paid to the SAB Foundation since inception.

SAB Zenzele Holdings Ltd, which holds shares for the benefit of retailers, will receive an interim dividend of R21-million. A cumulative R111-million in dividends has now been paid to SAB Zenzele Holdings since the launch of the transaction.

Employee beneficiaries of the SAB Zenzele Employee Trust will receive an interim dividend totalling R17.2-million, with a total of R100-million in dividends having now been paid out to the SAB Zenzele Employee Trust since the deal began.

Since the implementation of SAB Zenzele in 2010, SAB has paid a total of R256-million over in dividends to SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited.