The release of global brewing giant SABMiller’s final 2005 results on Thursday have highlighted the continued robust growth in its South African beer business, with Beer South Africa recording a 20% rise in its earnings before interest, tax and amortisation (Ebita) in rand (constant currency) terms.
With the strengthening of the rand against the dollar, the result was even better, leading to a 36% rise in dollar Ebita for the company to $708-million, from $522-million in 2004.
At $708-million, South Africa contributed by far the most to SABMiller’s 2005 Ebita of $2,41-billion out of the five global regions, with the next-highest Ebita coming from North America at $497-million.
Beer South Africa’s beer volumes achieved good growth, ending the year 3% higher than 2004 at 25,9-million hectolitres.
Impacting the results was the transfer during the year of management responsibilities for exports to Angola to the Africa and Asia division, resulting in a pro-forma comparable increase in sales volume of 4%.
Turnover grew by 13% in rand terms, and in dollars, turnover was 28% higher at $2,52-billion, up from $1,96-billion in 2004. The Ebitda margin increased to 28,1% following an increase in raw material productivity, strong cost control and improved efficiencies.
Domestic sales revenue increased by 10% per hectolitre in rand terms from 2004. Manufacturing efficiencies were maintained at high levels.
Commenting on the result, South African Breweries (SAB) MD Tony van Kralingen said the South African economy has continued to perform well, with low interest rates, low inflation and lower taxes contributing to an increase in consumer confidence and spending.
“The increase in disposable income positively affected the mainstream beer drinker. The shift to premium brands continues to gain momentum and has grown by more than 50%, driven by brand growth and marketing capability.
“Miller Genuine Draft grew by 43% year on year, while Amstel Lager grew by 45% and Castle Lite by 107%. In the fruit alcoholic drinks category, Redds and Brutal Fruit grew by 33% and now hold a 48% share of this market segment, up from 22% three years ago.”
Strong sales growth and changes to pack and brand mix resulted in the need to increase both packaging and brewing capacity and flexibility capability, Van Kralingen added. Plans were well advanced to bring the first tranche of capacity on line before the 2005 summer peak.
In December 2004, SAB acquired the business of soft-drinks bottler ABI and incorporated it into the company under the soft-drinks division banner. The group paid R3,7-billion to minority shareholders in buying the remaining 26,5% shareholding of ABI.
ABI’s volumes were buoyant, rising by 8,2% on the back of a favourable consumer environment and moderate price increases. This significantly exceeded growth in consumer spending.
Volumes were driven by the successful building of customer service and increasing distribution reach. Turnover in local currency increased by 11%, while Ebitda was up 19% for the year in local currency.
Factors contributing to this performance were share gains in the carbonated-soft-drink category, where volumes were up 7,7% for the year following repositioning of some brands and more effective promotional spending. Other soft-drinks growth was 18,2%.
Commenting on one of the more urgent issues for the liquor industry, Van Kralingen said: “Progress in licensing the previously unlicensed shebeen trade has continued to be below expectations, given delays in provincial licensing legislation.
“In the Eastern Cape, however, increased temporary licensing has resulted in a doubling of customers during the year. The company continues to engage with the relevant licensing authorities and assist shebeeners to increase the pace of licensing across the country and is investing in training to enhance the business skills of taverners.”
The company added that good progress was made over the year by the South African liquor industry in formulating a black economic empowerment charter. Internal targets to finalise the charter by later in the year were, however, being hampered by the government’s delay in publishing the full BEE codes of good practice. — I-Net Bridge