SAB RESULTS: SAB Posts Strong Growth in Profit & Margins
Recent Gauteng Business News
The South African BreweriesÂ’ (SAB) today announced strong increases in group revenue, operating profit and margins in the year to end March 2012.
The performance was driven by the on-going execution of the business strategy, launched in 2009. The strategy has seen SAB achieving cost-savings and efficiencies which have been re-invested into market-facing activities to drive profitable growth.
The gains were made despite challenges in the operating environment, which included intensified competition and volatile consumer demand. The stronger performance enabled SAB to declare a full year dividend up 23% to R116-million under its black economic empowerment scheme Zenzele, as the initiative continued to deliver excellent value for shareholders. This is the fourth dividend declared since the programme was launched in 2010, bringing the total dividends declared to date to R210-million.
SAB is made up of the beer business, soft drinks division ABI, Appletiser and a 29% stake in Distell.
SAB group revenue grew 4% to US$5.815-billion (or 8.7% on a constant currency basis) in the review period from US$5.598-billion previously.
EBITA grew by 9% to US$1.168-million from $1,067-million (or 14.4% on a constant currency basis) and EBITA margins showed a 100 basis point improvement to 20.1% from 19.1% previously.
SAB Chairman and MD Norman Adami said: Â“We have improved our commercial strength through significant targeted investments which have been largely funded by our on-going ability to achieve cost savings. This is driving steady, profitable and sustainable growth. We are very pleased with the results which were achieved in a highly competitive market and a challenging economic environment.Â”
The lager business outpaced a growing beer market to stabilise and grow market share, with lager volumes improving 2% to 26.85-million hectoliters (hl) from 26.3-million hl the previous year.
Key Achievements for SAB During the Review Period Include
Market share gains have been made in a highly competitive market, with SAB now holding close to 90%;
The mainstream power brands Â– Castle Lager, Carling Black Label and Hansa Pilsner - are collectively growing;
Castle Lite has been established as the largest and fastest growing premium beer brand in the country, achieving a moving annual growth of 24%. Over the past three years, the brand has grown a cumulative 68%;
SABÂ’s three global brands Â– Grolsch, Millers and Peroni Â– have been repositioned for growth, with a specialised, dedicated team behind them;
SABÂ’s share of the draught market has grown strongly following the roll-out of more than 2 500 new taps over the past year;
There has been significant product and packaging innovation across all brands, particularly with cans which is a focus area;
More than R1.6-billion has been saved through cost reduction and an incremental R2-billion has been invested in market facing activities over the past three years;
A step-change in retail execution and customer service has been achieved, with SABÂ’s reach and intensity significantly improved with the four key classes of trade;
Two ground-breaking initiatives aimed at combating alcohol harm were launched in the review period:
The Responsible Trader Programme (RTP): The first programme of its kind to be launched in the country, RTP is aimed at promoting responsible trading amongst retailers. More than 16 500 traders participated in the programme in 2012;
The You Decide Underage Programme: SAB partnered with government and a youth agency to implement a multifaceted intervention designed to change the behaviour of underage drinkers and teach those people close to them how to recognise the problem. The programme was rolled out to more than 185 000 learners in 288 schools in 2012
RTP and the You Decide Underage Programme form part of SABÂ’s responsible use alcohol strategy which has made significant progress since its launch in September 2009. The innovative strategy is a multi-faceted effort to combat alcohol abuse and its negative effects on society.
Soft Drinks Business in SAB
Soft drinks volumes at SAB grew 2% to 17.98-million hl from 17.57-million hl previously following particularly strong growth in the second half of the year.
This was achieved as a result of the continued delivery of the growth strategy outlined in 2009 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 success for SAB, including:
Strong improvement in customer service levels, resulting in, amongst others, increased frequency of deliveries and reduced out-of-stocks;
More than 18 000 new customer outlets added, increasing the outlet universe by almost 30% over the past two years;
Independent distributors have been established to service smaller and traditional markets, called local market logistics partners (MLPs). These have improved the companyÂ’s reach and flexibility, with the current 42 MLPs expected to rise to more than 80 by 2014;
All PET lines have been upgraded for greater capacity and to become more efficient;
Initiatives to reduce costs are producing benefits, focusing on packing cost savings, streamlining warehousing operations and improved secondary and primary distribution;
Revenue growth management and cost competitiveness have been strengthened;
ABI has identified substantial growth potential in the local market and has continued to invest in capability and capacity to capitalise on this. Investments in cold drinks fridges have increased and ABI has also increased its feet on the street.
Appletiser, which is 100% owned by SAB, posted improved volumes and grew revenues, benefitting from the introduction of a new line-up of packaging options for the Appletiser and Grapetiser products which delivered strong growth in the marketplace.
Full Dividend for SAB Zenzele Empowerment Deal Rises
In terms of SAB Zenzele, the companyÂ’s broad-based black economic empowerment transaction, the SAB Board declared a full year dividend of R116-million, a 23% increase on the previous yearÂ’s dividend of R94.4-million. The dividend for the first half of the financial year amounted to R43,37-million and the second half dividend amounted to R72,65-million. It will be shared by the SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited.
One of the unique features of SAB Zenzele is the payment of dividends to shareholders from the first year, which was undertaken in order to ensure that the scheme delivers real and tangible benefits. This yearÂ’s dividend means that a total of R210-million has been paid out to beneficiaries since the transaction was launched in 2010.
The SAB Foundation, which supports community based projects, will receive a full year dividend of R20.4-million against R17.19-million previously. The Foundation has three programmes which seek to promote entrepreneurship amongst historically disadvantaged people. Since the first entrepreneurial investments were made last year, a total of 40 micro and small enterprises have received financial investment and business support. This has resulted in 93 jobs being created. A cumulative R37.6-million in dividends has now been paid to the SAB Foundation.
R90mill Paid to SAB Zenzele Holdings
SAB Zenzele Holdings Ltd, which holds shares for the benefit of nearly 40 000 black retailers, will receive a dividend of R50.7-million from R39.3-million previously. Retailers who acquired the minimum allocation of shares for R100 will receive more than R706 in dividends for the full year, or seven times their initial investment. A cumulative R90-million in dividends has now been paid to SAB Zenzele Holdings.
Employee beneficiaries of the SAB Zenzele Employee Trust will receive a dividend totalling R44.9-million from R37.87-million previously. The average employee on the shop floor will receive a dividend of R2 754 for the year. A cumulative R82.8-million in dividends has now been paid out to the SAB Zenzele Employee Trust.
Mr Adami said: Â“We have again seen excellent growth in dividends for our Zenzele shareholders as we continue to deliver on our goal of ensuring that SAB Zenzele is a truly broad-based, innovative and value adding transaction.Â”
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