[Johannesburg, 15 May 2008]  Following the release of SABMiller plc’s preliminary results for the period to end March 2008, the South African Breweries Limited has announced that notwithstanding the loss of a licence to manufacture a premium brand in March 2007 (then 9% of volumes), the company had recorded Rand revenue growth of 6%, maintained lager volumes in line with last year and contained the EBITA drop to 6% in constant currency.

 

EBITA was affected by higher raw material input and distribution cost increases, which, coupled with the negative margin effects of a change in the beer portfolio mix, decreased the EBITA margin to 23.1%.  Raw material costs increased by an average of 15% as a result of increasing international commodity prices which led to a large increase in key brewing materials including glass, packaging, energy and CO2. Glass costs were particularly high following the importation of glass at a premium to local supply, due to capacity constraints at local glass manufacturers.

 

Overall distribution costs rose by over 30%.  This was the result of higher international crude oil prices and depreciation of the rand that drove diesel costs up by some 47%.  Costs also rose in line with our direct distribution strategy which saw a 16% increase in the number of main market outlets serviced (totalling 23,400 for the full year).

 

Soft drink volumes were 4% up despite high prior year growth of 7% and taking into account the CO2 shortages experienced in the country over the fourth quarter.  Growth was achieved despite a decline in volumes in the lower margin alternative beverage category, primarily due to the discontinuation of the Bibo fruit cordial and Milo brands.

 

Lager volumes grew in both the mainstream and flavoured alcoholic beverage (FAB) categories. The anticipated drop in premium volumes was offset by the strong launch of Hansa Marzen Gold and particularly good growth in Castle Lite, now the company’s biggest selling premium brand.  Peroni Nastro Azzurro, which is available on tap and in the 660ml returnable bottle, also did well with volumes doubling. Robust growth in Hansa Pilsener and Castle Milk Stout underpinned the mid single digit growth in the mainstream category, and strong growth across the Brutal Fruit range of variants contributed to the double digit increase in FAB volumes.

 

Price increases were at a level somewhat below inflation for both lager and soft drinks, and revenue growth was constrained by adverse mix effects in lager, driven by the swing out of higher priced premium brands into mainstream brands.

 

Increased investments in marketing, innovation and new product development delivered a number of new product launches and pack renovations in the year. Launched a year ago, Hansa Marzen Gold already constitutes some 23% of total premium sales.  Innovation in the FAB category saw two new brands being launched in the last quarter of the financial year: Sarita Ruby Dry, a dry, red apple-flavoured beverage and citrus-flavoured Skelter’s Straight.

 

Both Hansa Pilsener and Castle Lager received pack design upgrades in the year to coincide with the introduction of the new 750ml returnable bottle. In the premium segment, the Peroni Nastro Azzurro pack offering was extended in the year to include draught, 330ml cans and a new 660ml returnable bulk pack.

 

SAB made good progress on its quart bottle replacement programme, which will see 430-million new returnable bottles introduced to the SA market.  By March 2008 all but two of its seven breweries were running the new 750ml returnable bottle. The market has reacted very positively to the new bottle and this has contributed to the resurgence in growth in the mainstream category.

 

Administrative delays at local government level continue to frustrate the progress of liquor licensing across the country. During the year, the Mahlasedi Taverner Training programme trained 3,403 taverners to run sustainable and responsible businesses, bringing the total number of trained taverners to 13,421. SAB confirmed its commitment to invest R100-million over five years, depending on the pace of provincial licensing.

 

ENDS

 

For further information on SAB Ltd, please contact Tamra Veley on 083 251 3658 or Dominique van Onselen on 082 802 8184.

 

For further information on SABMiller plc’s results, please contact Nigel Fairbrass on +44 20 7659 0105 or +44 77 9989 4265.