SAB AR 01-13

134 Pages·2004·2.81 MB·English

SABMiller plc
Annual
Report 2004
Occupying
a top three
position
in more
30
than
countries
top 50
More
beer brands than
any other brewer
Brewing
operations
40
in over
countries
150
beer
brands owned
SABMiller
A story of growth
From its South African origins,
SABMiller has become one of the world’s largest brewing companies.
With operations in over 40 countries, it has more beer brands in the
world’s top 50 than any other brewer and it ranks among the top three
brewers in more than 30 countries. Every minute of every day, consumers
the world over drink an average of over 46,000 pints of SABMiller beer.
SABMiller is passionate about brewing. From local beers steeped
in tradition to brands that are recognised around the world, the company’s
ambition is always to offer an outstanding product. Its quality is backed
by some of the most efficient brewing and distribution operations in the
industry – not to mention its long and successful record of market
research, brand development and superb marketing in all corners of the
world. Its success also lies in the way it conducts its business – with
respect for partners and employees and a desire to do the best for the
local community.
SABMiller’s history is one of exceptional growth and returns to
shareholders. With its global footprint, strong portfolio of brands and
spread of operations in both mature and developing markets, SABMiller
is well placed to continue its growth.
CONTENTS
HIGHLIGHTS 1 FINANCIAL REVIEW 22
CHAIRMAN’S STATEMENT 2 CORPORATEACCOUNTABILITY 26
CHIEFEXECUTIVE’S REVIEW 4 CORPORATEGOVERNANCE 30
SABMILLER TODAY 8 BOARD OF DIRECTORS 38
REVIEWOFOPERATIONS EXECUTIVE COMMITTEE 40
NORTH AMERICA 10 DIRECTORS’ REPORT 41
CENTRAL AMERICA 13 REMUNERATION REPORT 44
EUROPE 14 ANNUAL FINANCIAL STATEMENTS 52
AFRICA & ASIA 16 FIVE-YEAR FINANCIAL REVIEW 122
SOUTH AFRICA 20 DEFINITIONS 124
BEER 20 SHAREHOLDERS’ DIARY 125
OTHER BEVERAGE INTERESTS(OBI) 21
HOTELSANDGAMING 21
SABMillerplc1
Highlights
2004 2003 15,000
US$m US$m# % change
12,000
Turnover^ 12,645 8,984 41
EBITA* 1,893 1,270 49 9,000
Profit before tax 1,391 770 81
6,000
Adjusted profit before tax* 1,705 1,107 54
Adjusted earnings* 925 581 59 3,000
Adjusted earnings per share* Turnover US$ (million)
US cents 77.6 54.0 44
01 02 03^ 04
UK pence (up 31%) 45.8 34.9
SA cents (up 7%) 547.6 513.3
Basic earnings per share(US cents) 54.1 27.5 97
Dividends per share(US cents) 30.0 25.0 20
Net cash inflow from operating activities 2,292 1,568 46
# Includes Miller Brewing Company for nine months. 2,000
^ 2003 turnover has been restated downwardbyUS$128milliontoreflecttheadoption of FRS5Reporting
thesubstanceoftransactions, application note G–revenuerecognition.
1,600
* EBITAandadjustedprofitbefore taxcompriseprofitbeforeinterest and tax(US$1,579million)and profit
before tax(US$1,391million)respectively beforegoodwillamortisation(US$355million),andbefore
1,200
exceptionalitems(netcreditUS$41million–seenote5).The calculation of adjusted earnings is given
innote11.
800
Total lager volumes increase 18.9% to 137.8 million hls, 400 EBITA (pre-exceptional)
US$ (million)
organic growth of 3.7%
01 02 03 04
Miller turnaround on track and showing momentum
Continuing excellent performances in Europe,
EBITA* up 39%
80
Further good performance from Africa & Asia, 70
EBITA* up 31% 60
50
Strong growth in Beer South Africa, EBITA up 54%
40
Adjusted EPS US cents
Balance sheet strength reflects cash generation
01† 02 03 04
and successful refinancing
†Restated for deferred tax change in accounting policy.
2SABMillerplc
CHAIRMAN’S STATEMENT
Another
milestone year
From our South African origins, we’ve risen to the top league of the
international brewing industry by the planned and careful process we outlined
five years ago. The result is a spread of operations, well balanced between
fast-growing developing markets and cash-generating developed markets.
Dear Shareholder that we’re still in the early stages and beverage sales of 174million hectolitres.
I am delighted to report that the financial much remains to be done. Our Central Also over this period, the company’s
year to 31 March 2004 has been an American operation delivered higher market capitalisation has grown from
outstanding one for your company. earnings, thanks to the actions we’ve £3.4billion to £6.6billion, and wehave
Turnoverincreased by some 41% while taken to improve its brand portfolio and risenfrom number 81in the FTSE 100
adjusted earnings per share were up by enhance its efficiency. There were strong to number 34asatmarketcloseon
44%. Pleasingly, for the first time, our results from South Africa in both beer 20 May,thedayofourpreliminary
adjustedearnings per share showed an and soft drinks, helped by the rise of resultsannouncement. Since our listing,
increase in all our major currencies. In the rand against the dollar. The rest our total shareholder return has been
view of this performance, the board has of Africa produced animpressive a gratifying 74%compared with negative
recommended anincrease in the final performance and we again saw good 17%for the FTSE 100 as a whole.
dividend to bring the total for the year growth in Europe with Russia doing In 1999, we set out a three-part
to30UScents,a20%increase.The particularly well. strategy for growth – improving our
dividend,whichiscovered2.6timesby Meanwhile, we’ve continued to volumes, margins and cash flow in South
adjusted earnings,isatalevel thatwe strengthen our position in new, emerging Africa; expanding our positions in other
believeshouldgrowovertimein linewith markets by acquiring furtheroperations developing markets; and seeking major,
thetrend ofanyincrease inearnings. inChinaand by forming a joint venture value-adding investments in both
Netcash flow generated in the year in India with Shaw Wallace breweries. developing and established markets.
totalled US$2,292millionfromoperating Also during the year, we’ve developed Our London listing, as we said at the
activities. The balance sheet remains our European portfolio with the time, would “enhance the ability of
strong with gearing at 43.3% – this after acquisition of Birra Peroni in Italy and SAB to take advantage of increasing
US$576million of capital expenditure, gained entry to Morocco and Algeria consolidation in the international brewing
ofwhich33%wasinnew capacity and through our joint venture with Castel. industry and to compete with other
67%in maintenance expenditure. During international brewers for development
the year we launched a successful Five years of progress opportunities throughout the world.”
US$2,000 million debtoffering. It’s now five years since SAB was listed Milestones over the five years
It is particularly gratifying that all our on the London Stock Exchange. In includeoursuccessinPoland;the
businesses did well. In the US, results 1999, we had 39 breweries, operated purchase of Pilsner Urquell in the
from Miller Brewing Company – acquired in 18countries and sold 48 million Czech Republic in 1999; our move
in 2002 – have answered many people’s hectolitres of beer and 70million into India in 2000; being the first
scepticism about our ability to restore hectolitres of beverage overall. Contrast international brewer to enter Central
the business to financial health. The that with today’s figures: 81breweries; America in 2001; forming a pan-African
turnaround programmes now in place operations in 43countries on four alliance with Castel to invest in new
are already having an effect on continents; annual beer sales of African marketsin2001; and, in 2002,
performance, though I should point out 138million hectolitres and total acquiring Miller Brewing Company,
SABMillerplc3
invitea new independent director,
JohnManzoni, tojointheboardand
hewill take office from 1August 2004.
Lord Renwick will hand over the
chairmanship of the remuneration
committee to Miles Morland, classified as
an independent directorand I will step
down as a member of the committee.
Louis Camilleri will step down from the
board to concentrate on his executive
duties in Altria Group, Inc.. Full details of
the changes are outlined inthe corporate
governance report.
MikeLevetthas made an enormous
contribution in his 20 years with the
company, first on the South African and
then on the UK board. He leaves with
our gratitude and best wishes for the
future. I would also like to thank Louis
Camillerifor providing advice and
support to the management and to
recognise his crucial role in the Miller
transaction. We welcome,mostwarmly,
JohnManzonitotheboard.
We also said goodbye during the
year to former board members Pete
Lloyd and MikeSimms, both of whom
the second largest brewer in the US. As a brewer, we believe we have a retired from the company having made
Morerecently,weachievedincremental special duty to promote the responsible tremendous contributions to our South
expansioninChinaandPoland,we use of alcohol. Consumed sensibly, African operations and, more recently, to
acquiredPeroniinItalyandformed alcoholic beverages can make a positive building our business around the world.
anew Indian joint venture. In addition, contribution to people’s quality of life. In a year of outstanding results,
we’ve grown to become oneofthe Wedo, however, recognisethat I must also thank the39,500employees
world’s largest Coca-Cola bottlers. irresponsibleconsumptioncanhave ofouroperatingcompanies. They are
From our South African origins, negativeconsequences. To this end, the ones who have made it all possible
we’ve risen to the top league of the we continue to invest in alcohol and the board and I are grateful for
international brewing industry by the education and research programmes their skills and hard work. In thanking
planned and careful process we outlined and recently introduced a strict code them, we also salute our business
five years ago. The result is a spread of of practice to cover all our marketing partners whose local knowledge and
operations, well balanced between fast- and advertising. expertise have made such a difference,
growing developing markets and cash- especially in newer markets such as
generating developed markets. In his Board and corporate governance ChinaandIndia.
chief executive’s review, Graham Mackay We are fortunate to have a board of In summary,thelastfiveyearshave
explains how we now plan to carry this the highest quality and integrity with a seenyourcompanygrowanddevelop
strategy into the future. good balance of skills and experience. beyondallrecognition.Despitethemany
Nevertheless, at a time of growing public challengeswefaceinanuncertainworld,
Corporate social responsibility scrutiny and developments such as the thestrategycontinuesoncourseand we
Many of our markets are challenging Higgs Review, we want to be sure we looktothefuture withconfidence.
places to work and require great meet the most exacting standards of
sensitivity in dealing with partners, local governance while recognising the
communities and employees. Corporate sometimes different expectations of
social responsibility, or CSR, is therefore shareholders in different jurisdictions.
ingrained in everything we do. Our To address the requirements of the
commitment starts at the top with a new Combined Code on directors’
board-level committee responsible independence, we’re strengthening the Meyer Kahn
for our CSR performance.Some balance of independent representation Chairman
1%of pre-tax profits go to help the on the board and its committees. Mike
communities in which we operate, Levettwill not be seeking re-election at
through programmes covering the forthcoming annual general meeting
education, welfare and entrepreneurship. andwehaveusedthisopportunityto
4SABMiller plc
CHIEF EXECUTIVE’S REVIEW
Well positioned
to keep growing
Now that we’re established in the top tier of international brewers, we aim to
achieve sustainable growth in earnings by building on our existing operations,
restoring Miller in the US, strengthening our positions in China and India and
widening the reach of our premium brands.
SABMillerplc5
In a year of excellent results, our strong Established operations in significantsource of volume growth
growth in reported earnings is due to growth markets and we’re investing further in our Kaluga
three main factors.Firstly, we’ve seen South Africahas had an exceptionally brewery to meet demand. Pleasingly, our
sound operational performances from successful year. Behind the growth we Czech business saw further increases in
each of our businesses around the see some recovery in the market share both volumes and prices. Our volume
world. Secondly, while there’s still much of beer as against wine and spirits plus growth in Hungary outstripped the
to be done, our turnaround programme the trickle-down effect of an improving market and weareintheprocess
at Miller is starting to deliver results,with consumer economy.We also see good ofacquiringthe Aurora brewery in
particular momentum behind the Miller performances from our two international Romania to strengthen our number
Lite brand. Thirdly, we’ve benefited premium brands introduced last year – two position there.
from currency movements, mainly the Miller GenuineDraftand Pilsner Urquell Four of the countries in which we
strengthening of the rand which has – and from efforts to make soft drinks operate joined the EU on 1 May 2004.
enhanced the strong organic growth more affordable by offering smaller, The consequent restructuring may be
andoperational improvementsof our returnable containers. In both beer disruptive in the shortterm, but we
South African businesses. and soft drinks, the past year has re- should see futurebenefits in the
All these factors have contributed established the long-term upward trend respectiveconsumereconomies.
to the year’s excellent figures. Total in sales and shown that South Africa is In Central America, we’ve
beverage volumes were up 15% at capable of further organic growth. concentratedon improving our brand
173.9million hectolitres with lager sales Our wider Africaportfolio produced portfolios along with sharper market
rising 19% to 137.8million hectolitres. its usual share of ups and downs but a focus and greater operational efficiency.
Further details of our performance strong result overall. We benefited from Earnings have risen as a result.
arein the review ofoperations on the earlierrestructuring in Kenya and
pages 10to 21. Tanzania and saw strong progressfrom Turnarounds at Miller and Peroni
Angola where the economy isrecovering When we bought Millerin July 2002,
Our strategy for growth after the long civil war. The end of the it had suffered from a long period of
Thechairmanhasdescribedhow year brought new acquisitions in Algeria decline and many commentators were
we have builtSABMiller intoa strong, and Morocco through our joint venture sceptical that wewould be ableto fix the
international operator capable of further with Castel,whichitselfperformed second largest brewer in the US. We
growth in earnings both now and into verywell. recognised it would take time, but drew
the future. Our businesses in Europeproduced confidence from our record of successful
We see this growth occurring over excellent results. In Poland, thegrowth turnarounds in other parts of the world.
three time horizons. which previously swelledthemainstream We’ve now completed the analysis and
Inthenearterm, we look mainly to market is switching to the premium and restructuring phase and are in the
our strong, established operations in economy sectors and our own portfolio process of implementing our three-year
South Africa, the rest of Africa, Europe is changing in response. Russia, plan.The first green shoots of recovery
and, slightly further ahead, Central meanwhile, has taken over as a are starting to show.
America. These are markets with many
years of organic growth still ahead
‘
of them.
Inthemediumterm, additional
This year’s growth is due to three main factors.
growthwill comefromturning round the
recent big acquisitions, Miller and Peroni, First, we’ve seen sound operational performances
which we know have the potential to
produce strong, sustainable profits. from each of our businesses. Secondly, our
For the longerterm,wearebuilding
turnaround programme at Miller is starting to
on our positions in the large, emerging
markets of China and India, both of which
deliver results. And thirdly, we’ve benefited from
are capable of generating much greater
’
value. Depending on economic growth, the strength of the rand.
there may also be opportunities in Africa.
Inthelonger termwealsoexpect
to see a natural consumer drift towards
higher value, international brands.Our
globalplatformwillgiveustheabilityto
distribute anddevelopour own portfolio
of international premium beers, so
securing a further source of earnings.
We believe this pattern of growth
differentiates SABMiller from all its
competitors. It also provides a
framework for reporting our progress
in the past year.
6SABMillerplc
Chief elements of the culture we intend
to create.
We’ve tackled the problems at Miller
executive’s
in the only way we know – by analysing
the problem, asking the right questions,
review applying our knowledge of the beer
business and building capability.
The result is a stronger, more focused
business.Miller Lite isleading the
recoveryandin the coming months,
‘
We’ve tackled the
problems at Miller in the
only way we know – by
The plan has four areas of focus:brands,
sales and distribution, costs and analysing the problem,
productivityand organisational capability.
Each is importantandour eventual asking the right
success will depend on all these
questions, applying our
elementsworking together.
Withinthebrands, a huge amount of
knowledge of the beer
research wasconductedinto what the
Miller brands stood for and what they business and building
could be made to stand for. This led to a
repositioning and advertising messages capability. The result
initially focusedonthe Miller name itself
is a stronger, more
and then on Miller Lite. The Atkins-
’
inspired low-carbohydratetrend has
focused business.
put a fair wind behind Miller Lite and
we’re using this,whileitlasts,to build
momentum.We arenow turningour
attention to Miller Genuine Draft and we’ll be looking forpositivesigns inthe
the rest of the portfolio. rest of the brandportfolio.
Withindistribution, our success The Miller acquisition was followed
Top:Norman Adami, president and chief
depends on good execution in the in May 2003 by our purchase of Peroni executive, Miller Brewing Company and
millions of transactions that have to in Italy. Integration of the business into Graham Mackay, chief executive, SABMiller
plc, tour Milwaukee Brewery, USA; Middle:
take place every week. Again we’ve SABMiller is at much the same point that
OurleadingPolishbrandTyskiesellsmore
done a lot of analysis, segmenting and Miller was a yearago,althoughPeroni’s thananyotherof our brandsinEurope;
prioritisingthe US marketbychannel keybrandswerealwaysinbettershape. Bottom:Castle Lager deliveries in Cape
andbygeographyandthenaligning The analysis stage is almost complete, Town, South Africa.
allmarketingandsalesactivities but implementation stillliesahead. Again
accordingly.We’ve had great support we’re confident of generating value, will lead to better prices and that a
from our wholesalers who are now particularly as the Italian market grows growing beer culture will further our
working with us in each of these areas and consolidates. aim of building Snowinto a strong
to implement local market plans. This national brand.
process will be rolledoutcountrywide Large, emerging markets While we purchased a 29% interest
over the next 18 months. We’re currently one of the leading in Harbin Breweryearlierintheyear,we
For better costs and productivity, international brewers in the world’s haverecentlyannouncedourintentionto
we’ve reorganised Miller’s head office, largest beer market, China. Our joint disposeofthisinterestat asubstantial
re-aligned its management structures venture, China Resources Breweries, has profit.Wearesellingintoan offerbeing
and closed the Tumwater brewery to a 10% share of the Chinese beer market madeforthe sharesofHarbinataprice
improve capacityutilisation. and a record of being one of the most that webelievemorethanfullyvaluesthe
The last of our four areas of focus is profitable. Having grown organically potentialofthecompany.
organisational capability where we aim and through acquisitions, it now has 32 In India, we’ve consolidated our
to instil a new performance culture. breweries and a strong regional presence position through the Shaw Wallace joint
Again it’s going to taketime, but the insecondtierregionsand cities. venture which we areintheprocessof
Miller team has made exceptionalstrides The Chinese beer market is still at completing.Throughthejointventure
in clarifying accountabilities, investing an early stage of development. However, we willhave breweries inseveralstates
in new skills and putting in place the we’re confident that consolidation across India and a33% market share,