SAB posts strong results for six months to end September 2013
Thursday, November 21st, 2013
- SAB Beverages group net producer revenue grows 7% organically to R17, 9-billion
- EBITA grows 8% organically to R3, 8-billion
- EBITA margin grow 30 basis points to 21%
- Interim dividend of R48.9-million for empowerment programme Zenzele
- Lager volumes grow 3% to 12, 8-million hl
- Market share gains were made in the highly competitive beer business
- Soft drinks division volumes grow 1% to 7, 9-million hl
The South African Breweries benefited from ongoing investment in market facing activities and retail execution to post good gains in revenue and operating profit in the six months to end September 2013.
The strong performance was delivered in the face of a challenging trading period with subdued economic growth and continued strong competition. In addition, SAB faced a 7.5% increase in the excise rate this year, following on from the 10% rise in 2012 excise payments.
Good volume growth was delivered by both the beer and soft drinks portfolios in the face of rising costs due to the continued weakness of the rand and increased commodity costs.
The ongoing strategic focus on investing in market facing operations was funded partly by savings in non-market facing areas. Good cash flows resulted from ensuring a tight focus on working capital and capital expenditure.
SAB’s black economic empowerment scheme, Zenzele, benefited from the stronger performance, with the company declaring an interim dividend of R48.9-million. This is the seventh dividend declared since the programme was launched in 2010, bringing the total dividends declared to date to R383.8-million.
SAB is made up of the beer business, soft drinks division ABI, Appletiser and a 29% stake in Distell.
SAB interim group net producer revenue grew 7% organically to R17.9-billion from R16.6-billion previously.
EBITA grew organically by 8% to R3.8-billion from R3.5-billion previously and the EBITA margin showed a 30 basis point growth to 21.0% from 20.7% previously.
SAB Executive Chairman Norman Adami said: “Our strong financial results are testimony to the resilience of our strategy at a time when the external environment is highly volatile and factors such as another hike in excise have come into play. We have focused on managing those factors within our control which has allowed us to continue delivering profitable and sustainable growth.”
SAB Beer business
Strong growth in the lager business resulted in further gains in market share. Lager volumes improved 3% to 12, 8-million hectoliters (hl) from 12.4-million hl the previous year despite soft consumer spending and the absence of an Easter peak period.
During the half year, market share gains continued to be made in a highly competitive market, with SAB having raised its share to above 90%. Key brand achievements included:
- In the local premium segment, Castle Lite grew volumes more than 20% supported by packaging innovation centred on its “Extra Cold” positioning, while Castle Milk Stout also performed well;
- Among the mainstream power brands, Castle posted strong gains while Carling Black Label returned to growth;
- The repositioning of SAB’s three global brands – Grolsch, Miller Genuine Draft and Peroni – continues to gain traction;
- Brand innovation was a key focus area, with a number of new packaging formats, merchandising and promotional programmes introduced.
Customer service remained a key focus area to support strong retail execution, with the number of people servicing customers increasing and the continued enhancement of the
customer interaction centre.
SAB’s focus on tackling alcohol abuse remained in place, with key highlights including launching the next phase of the campaign to curb underage drinking under the You Decide programme and the success of a new public private partnership with the National Institute for Crime Prevention and the Reintegration of Offenders (Nicro).
Soft drinks business
Soft drinks volumes grew 1% to 7, 9-million hl with the inclusion of Appletiser. Soft drinks division ABI grew volumes 2% to 7.75-million hl from 7.6-million hl as the continued implementation of the growth strategy resulted in increased market penetration and improved customer service levels.
Margins were under pressure in the first half with the very low single digit price increases implemented across the South African bottling system, in an increased competitive environment. In line with our strategy, ABI continued to drive channel and market penetration particularly in the local and traditional trade through its increased direct store delivery approach. This resulted in the continued strong growth of the 2l PET pack in particular.
Other key highlights included:
- Targeted investment in coolers continued, ensuring a wider footprint of cold drink offerings for consumers;
- Growth in the still drinks portfolio was well above average, with strong contributions from the water brands and the Play brand;
- The frequency of deliveries continued to improve.
As a result, new customers continued to be added, with the outlet universe increasing by 9% to about 91 500 customers during the half year.
Appletiser volumes declined due to tough local trading conditions and the decision in Europe to focus on glass packs at the expense of PET.
Other Beverage Business
Driven by increased sales, our associate Distell reported mid-single digit EBITA growth on an organic basis (after adjusting for the excise settlement included in last year’s results).
Half Year dividend of R48.9-million declared for Zenzele empowerment deal
SAB’s broad-based black economic empowerment transaction, SAB Zenzele, continued to deliver real, tangible benefits for shareholders with the payment of dividends from the first year.
Based on SAB’s performance in the half year, the SAB Board has paid an interim dividend of R48.9-million, a 6.2% increase from R46-million paid 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 interim dividend means that a total of R383.8-million has been paid out to beneficiaries since the transaction was launched in 2010.
The SAB Foundation, which supports community based projects, will receive an interim dividend totalling R8.3-million, bringing to R67-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 R22.3-million, with a total of R169.2-million in dividends having been paid to SAB Zenzele Holdings Ltd since the launch of the transaction. On receipt of this dividend, retailers who bought the maximum allocation of shares for R14, 650 have paid off their initial investment in just three and a half years.
Employee beneficiaries of the SAB Zenzele Employee Trust will receive an interim dividend totalling R18.3-million, with a total of R147.6-million in dividends having now been paid out to the SAB Zenzele Employee Trust since the deal began.