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SAB grows profits, earnings in first half

The South African Breweries on Thursday reported group revenue grew 10% to $2.669 billion (or 5% on a constant currency basis) in the six months ended September 2011 from $2.432 billion previously, factoring in the 7.5% excise increase on beer earlier in the year.

EBITA grew by 13% to US$446 million, or 8% on a constant currency basis, and EBITA margins showed a 50 basis point improvement to 16.7% from 16.2% previously.

The improved performance was posted despite a challenging environment, with weaker consumer demand and the cycling of the positive impact of the 2010 FIFA World Cup in the prior year offsetting the benefit of a peak Easter trading period in April.

As a result of the stronger performance, SAB declared an interim dividend of R43.37 million under its black economic empowerment scheme Zenzele, a significant increase on the interim dividend declared in 2010. This is the third dividend declared since the programme was launched last year and highlights that the deal continues to deliver excellent value for shareholders.

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

SAB Chairman and MD Norman Adami said: "We are pleased that the successful implementation of our business strategy, launched in 2009, continues to result in tangible benefits for the business. The beer business has seen improved market share, operating profit and margins while in the soft drinks business, we have invested in market facing activities and improved productivity through the broader supply chain."

SAB Beer business saw lager volumes level at 12.290 million hectolitres (hl) from 12.274 million hl the previous year with the beer business gaining market share while operating profit and margins improved.

The growth was underpinned by continued efforts to strengthen the core brand portfolio, including intensifying investments in marketing and sales which were largely funded by cost efficiencies.

"The intensification of investment strengthened our core brands and supported an improvement in market share," said Adami.

Soft drinks volumes declined 3% to 7.245 million hl from 7.467 million hl, cycling the strong growth seen in the same comparable period in 2010, with the added impact of the colder and wetter weather and market share being flat. Manufacturing costs rose 6%, due largely to high resin and sugar costs which increased by 22% and 7% respectively.

ABI's growth strategy launched last year is gaining momentum, focusing on improving customer service, investing in market-facing operating infrastructure and improving productivity throughout the supply chain.

ABI continues to invest to realise its good growth potential by ensuring it has the capability and capacity to capitalise on this. The company is on track to add 25% incremental PET bottle capacity in 2011. Investments in cold drinks fridges have increased; additional fleet and dock levellers will come onstream this year and ABI has also increased its feet on the street.

Appletiser, which is 1000% owned by SAB, posted lower operating profit and margins contracted as the company went through a transition phase, with significant marketing investment placed behind the introduction of the new multi-serve PET packs. The launch of these new packs occurred in August and has been particularly successful which bodes well for the business.

Associate Distell overcame difficult trading conditions through their diverse portfolio and geographic footprint. This, coupled with pricing, enabled them to grow revenue and EBITA margin.

SAB's broad-based black economic empowerment transaction, SAB Zenzele, continued to deliver real, tangible benefits for shareholders. One of the most unique features of SAB Zenzele is the payment of cash dividends to shareholders from the first year. Based on SAB's performance in the review period, the SAB Board has declared a 14% increase in the interim dividend of R36.91 million in respect of the shares held by the SAB Foundation, SAB Zenzele Employee Trust and SAB Zenzele Holdings Limited.

An additional once-off dividend of R6.46million will be paid out to all Zenzele shareholders due to an internal reorganisation, which brings the total interim dividend to R43.37 million. This will be shared between the three groups of Zenzele beneficiaries, and means that a total of R137.73 million in dividends has been paid out since the transaction was launched last year.

The SAB Foundation, which supports community based projects, will receive an interim dividend totalling R7.9 million against R5.9 million previously. These funds are being used to benefit the wider South African community, focused particularly on promoting entrepreneurship amongst historically disadvantaged people. A cumulative R25 million in dividends has now been paid to the SAB Foundation since the transaction was launched last year.

SAB Zenzele Holdings, which holds shares for the benefit of retailers, will receive an interim dividend of R18.06 million from R13.51 million previously. Retailers who acquired the minimum allocation of shares for R1000 will receive more than R269 in dividends for the first six months, or 2.7 times their initial investment, while at the top end retailers will receive up to R1,811. A cumulative R57.36 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 R17.41 million from R13.02 million previously. The average employee on the shop floor will receive a dividend of almost R1,041 for the six months, with higher grades receiving more. A cumulative R55 million in dividends has now been paid out to the SAB Zenzele Employee Trust since the deal began.

"The intent behind SAB Zenzele was to have a truly broad-based, innovative and value adding transaction. Dividends for the interim period have grown significantly over the previous period, which clearly shows we are delivering on our intent of producing an initiative that is broadbased and makes a tangible difference to shareholders," said Adami.

 

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This article was originally posted on Africa Import Export Trading

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