Annual Report 2016 Annual Report 2016

202 Pages·2016·7.43 MB·English

SSAABBMMiilllleerr ppllcc
AAnnnnuuaall RReeppoorrtt
22001166
We are in the beer and soft drinks business.
We bring refreshment and sociability to millions
of people all over the world who enjoy our drinks.
We do business in a way that improves livelihoods
and helps build communities.
We are passionate about brewing and have a long
tradition of craftsmanship in making superb beer
from high quality natural ingredients. We are local
beer experts. We have more than 200 local beers,
from which we have carefully selected and nurtured
a range of special regional and global brands.
Read about our proud heritage overleaf…
Performance highlights
Group net producer revenue1 Revenue3 EBITA4 EBITA margin progression
-8% -10% -9% -10
basis points
2016: US$24,149m 2016: US$19,833m 2016: US$5,810m 2016: 24.1%
2015: US$26,288m 2015: US$22,130m 2015: US$6,367m 2015: 24.2%
+5%2 +7%2 +8%2 +60

basis points2
Beverage volumes Profit before tax Adjusted EPS5 Dividends per share6
+2% -16% -6% +8%
2016: 331m hectolitres 2016: US$4,074m 2016: 224.1 US cents 2016: 122.0 US cents
2015: 324m hectolitres 2015: US$4,830m 2015: 239.1 US cents 2015: 113.0 US cents

Water usage (beer)7 Net debt8 Free cash flow9 Total shareholder return10
Five-year
-3% -8% -8% 115%
2016: 3.2 hl/hl 2016: US$9,638m 2016: US$2,969m Peer median: 102%
2015: 3.3 hl/hl 2015: US$10,465m 2015: US$3,233m
1 G roup net producer revenue (NPR) is defined on page 192 and includes the group’s 5 A reconciliation of adjusted earnings to the statutory measure of profit attributable to equity
attributable share of associates’ and joint ventures’ net producer revenue of shareholders is provided in note 8 to the consolidated financial statements.
US$9,254 million (2015: US$9,754 million), but excludes excise duties and other
6 The 2016 final dividend is subject to shareholder approval at the annual general meeting.
similar taxes.
7 Water usage is defined on page 193.
2 Growth on an organic, constant currency basis.
8 N et debt comprises gross debt (including borrowings, financing derivative financial instruments,
3 R evenue excludes the group’s attributable share of associates’ and joint ventures’ revenue
overdrafts and finance leases) net of cash and cash equivalents (excluding overdrafts).
but includes excise duties and similar taxes.
An analysis of net debt is provided in note 27c to the consolidated financial statements.
4 N ote 2 to the consolidated financial statements provides a reconciliation of operating profit
9 N ote 27b to the consolidated financial statements provides a reconciliation of net cash from
to EBITA which is defined as operating profit before exceptional items and amortisation of
operating activities to free cash flow.
intangible assets (excluding computer software) and includes the group’s share of
associates’ and joint ventures’ operating profit, on a similar basis. As described in the 10 Total shareholder return (TSR) is shown as the percentage growth in our TSR over the five
finance review, EBITA is used throughout this report. years to 31 March 2016.
Our story
Brewing and selling beer is where we began in 1895,
and beer accounts for the majority of our business today.
1895
The South African Breweries (SAB) is founded, with its head office
in the Castle Brewery. Two years later, SAB becomes the first
industrial company to list on the Johannesburg Stock Exchange.
Little could Charles Glass have known that his Castle Lager would
still be South Africa’s most famous beer 120 years after its launch.
1979
SAB expands into fruit
juices, taking a 49%
1978 interest in Appletiser
SAB publishes a code from its Italian founder.
of non-discriminatory Coca-Cola sold control
employment – a first of Appletiser to SAB 1994
in South Africa. in 1982.
– SAB enters Tanzania
followed by Angola,
Mozambique and Zambia.
– SAB negotiates joint control
1990s
with China Resources of
SABMiller embarks the second largest brewer
on rapid international in mainland China – the
expansion home today of the world’s
largest beer brand, Snow.
1955
SAB acquires its two
competitors, Ohlsson’s and
Chandlers Union Breweries and
streamlines production and
distribution within the sector.
From this position of strength,
SAB was set to enter decades of
uninterrupted growth.
1977
SAB opens its first
1993
Coca-Cola bottling
1995
operation in SAB acquires the Dreher
South Africa. Brewery in Hungary, – Nelson Mandela opens SAB’s
signalling the beginning of Centenary Centre in the cultural
a game-changing decade precinct of Johannesburg.
of mergers and acquisitions. – SAB acquires a majority stake
in Poland’s Lech brewery and
acquires the Tyskie brewery
Read more about our history at www.sabmiller.com/about-us/history the following year.
The most local of the global brewers
Our business began life 120 years ago in the Johannesburg gold rush when Charles Glass founded
the Castle Brewery. Today, we are a global community of beer and beverage experts, producing
some of the world’s most recognised global and local beers. At SABMiller we have a proud beer
heritage. We’re the original brewmasters; making beers people love by truly understanding local
tastes. Our brewing magic turns simple natural ingredients into beers that are part of national
identity and culture. That is why we believe the value in beer is local, and why we have built
SABMiller as the most local of global brewers.
Visionary leadership
In the early 1990s we set out to become a truly international
beverage company, building on a century of brewing expertise.
Our foray into international brewing was bold, in that it focused
on the rapidly developing economies of central Europe, China and
Africa. Where others saw risk, we saw opportunity. And our long
experience in South Africa had given us considerable experience in
running multicultural operations in developing markets. Our 1993
acquisition of the Dreher brewery in Hungary signalled the start
of a journey to become the world’s second biggest brewing company.
2007-8
– 2007 – SABMiller acquires Koninklijke
Grolsch NV in the Netherlands.
– 2008 – SABMiller combines Miller
Brewing with the US business of
Molson Coors, to create the MillerCoors
joint venture.
1999 2002
– First day of trading of SAB makes its first significant
SAB shares on the entry into a developed market
London Stock with the Miller Brewing Company
Exchange: 1 March transaction, and changed its 
1999. List price: 428p name to SABMiller.
Closing price: 447p.
Market capitalisation
based on list price:
£3,261m.
2003
– SAB acquires
controlling interest in SABMiller makes its first
Plzen ˘ský Prazdroj in significant investment in
the Czech Republic, western Europe, acquiring
owner of leading a majority interest in Italian
brands Pilsner brewer Birra Peroni.
Urquell, Gambrinus,
Kozel and Radegast.
2001
– SAB becomes the first
international brewer to enter
2005
Central America when it acquires
2009
the Honduran brewer Cervecería SABMiller’s next step is to move
Hondureña and Industrias La into Latin America through the SABMiller launches a broad-based
Constancia in El Salvador. acquisition of Colombia’s black economic empowerment
– A pan-African association Bavaria SA, the second largest transaction in South Africa,
with the Castel group offers brewer in the region with involving an equity issue of 8.45%
the opportunity to invest in leading positions in Colombia, of The South African Breweries
promising new African markets Peru, Ecuador and Panama. (Pty) Limited.
and benefit from economies
of scale.
Today
Contents
S
T
R
Strategic report A
T
We have 70,000 employees working in more Performance highlights Ifc EG
Business overview 2 IC
than 80 countries. We produce over 200 beers, Chairman’s statement 4 RE
Chief Executive’s review 6 P
O
and every minute of every day, more than Our business model 12 RT
Market overview 14
140,000 bottles of SABMiller beer are sold. Key performance indicators 15
Principal risks 16
We also have a growing soft drinks business Operations review
Latin America 18
as one of the world’s largest bottlers of Africa 22
Asia Pacific 26
Coca-Cola drinks. Europe 30
North America 34
Finance review 38
Sustainable development 48
2014 G
Valuing and supporting our people 52 O
V
The Coca-Cola Company, SABMiller plc, E
R
and Gutsche Family Investments agree Governance N
A
to create Coca-Cola Beverages Africa, Board of directors 54 N
C
the largest Coca-Cola bottler in Africa, Executive committee 56 E
accounting for approximately 40% of all Corporate governance 58
Coca-Cola beverage volumes in Africa. Audit committee report 70
Directors’ remuneration report 74
Directors’ report 93
2011
SABMiller acquires the Foster’s Financial statements
Group, the leading brewing Independent auditors’ report to
group in Australia, the members of SABMiller plc 98
strengthening its position in Consolidated income statement 103
the Asia Pacific region. Consolidated statement of
comprehensive income 104
Consolidated balance sheet 105
Consolidated cash flow statement 106
F
Consolidated statement of changes IN
in equity 107 A
N
Notes to the consolidated C
IA
financial statements 108 L
Balance sheet of SABMiller plc 171 ST
A
Statement of changes in the T
E
company’s equity 172 M
Notes to the company financial statements 173 EN
Related undertakings 186 TS
Five-year financial review 190
Definitions 192
Shareholder information
Ordinary shareholding analyses 194
Shareholders’ diary 194
Administration 195
2015
Cautionary statement 196
– SABMiller acquires the London-based
2012 S
Meantime Brewing Company, H
A
SABMiller and Anadolu Efes a pioneer in British modern craft beer. R
E
form a strategic alliance – The board of SABMiller reaches H
covering Turkey, Russia, the agreement on the terms of a OL
D
CIS, Central Asia and the recommended offer for the E
R
Middle East. company by Anheuser-Busch InBev IN
SA/NV (AB InBev). F
O
R
M
A
Further information Key to further reading: The strategic report and directors’ report TIO
have been approved for and on behalf N
This report covers the financial year ended 31 March 2016. Read more on page referenced of the board of SABMiller plc on 10 June 2016.
It is also available on our website as a downloadable PDF
Read more online
www.sabmiller.com/annualreport2016 Alan Clark
Read more in the referenced report Chief Executive
For more detailed information about SABMiller please refer
to our website www.sabmiller.com/investors
SABMiller plc Annual Report 2016 1
STRATEGIC REPORT
Business overview
SABMiller by numbers We have a balanced
spread of businesses
US$5,810m +1% with a significant

presence in
Group EBITA (2015: US$6,367m). developing markets
Group lager volume.
69%
The proportion of EBITA 249m hl
from developing markets.
Our five shared
EBITA by region1
imperatives are
%
aligned with
Latin America 33%
US$1,959m 12 of the 17 North America
Africa 29%
UN Sustainable
US$1,708m
Asia Pacific 13% Development Goals. Where we operate
US$753m Regional office:
Europe 11% Chicago, USA
US$636m MillerCoors is a joint venture
6%
North America 14% with Molson Coors Brewing
US$865m Company, which was formed in
2008 by bringing together the
US and Puerto Rican operations
140,000 Soft drinks
of both groups.
volume growth.
What we do
Every minute of every day, – MillerCoors is the second
70,000
more than 140,000 bottles largest brewer in the USA,
with 27% of the beer market.
of SABMiller beer are enjoyed – Our wholly-owned Miller
around the world. Brewing International business
is based in Milwaukee, USA
and exports and sells our
brands to Canada, Brazil
SABMiller has 70,000 and Mexico and throughout
employees and is in more the Americas.
94%
#1 than 80 countries. Read more on page 34
The proportion of our Subsidiary NPR growth.
#2
total lager volume from
markets in which we have 8 %2
no 1. or no. 2 national market
share positions.
Our global brands are Peroni Nastro Azzurro, Miller Genuine Draft,
Miller Lite, Pilsner Urquell, and Grolsch.
+12% +13%
1 B efore Corporate costs.
2 O n an organic, constant currency
NPR premium NPR global basis.
3 S ubsidiaries only, excluding home
brands growth3. brands growth4.
markets, on a constant currency basis.
4 S ubsidiaries only, excluding home
markets.
2 SABMiller plc Annual Report 2016
S
T
R
A
T
E
G
IC
R
E
P
O
R
T
Europe
Where we operate What we do
Regional office: – In the majority of these countries we are the number one
Zug, Switzerland or two brewer by market share.
Our primary brewing operations – We cover a further 16 countries including Russia, Turkey,
cover nine countries: the Czech and Ukraine in a strategic alliance with Anadolu Efes
Republic, Hungary, Italy, Poland, through brewing, soft drinks and export operations.
Romania, Slovakia, Spain (Canary – We export significant volumes to a further six European
Islands), the Netherlands, and markets, of which the largest are Germany and France.
the UK.
Read more on page 30
Africa
Asia Pacific
Where we operate
Latin America
Regional office:
Johannesburg, South Africa Where we operate
Where we operate Our primary brewing and beverage Regional office:
Regional office: operations in Africa cover 17 countries Hong Kong
Miami, USA including Botswana, Mozambique, Our brewing interests across Asia Pacific
Our primary brewing and beverage Nigeria, South Africa, Tanzania, Uganda, cover four countries: Australia, China, India,
operations cover six countries across and Zambia. A further 21 countries are and Vietnam.
South and Central America: Colombia, covered through our associate interests
Ecuador, El Salvador, Honduras, in the Castel group’s African beverage What we do
Panama, and Peru. businesses and we also have an – CR Snow, our partnership of more than
associated undertaking in Zimbabwe. 20 years with China Resources Beer
What we do (Holdings) Co Ltd, is the largest brewer
– In each of these countries we are the What we do in China.
number one brewer by market share. – In most of these countries we are the – Carlton & United Breweries (CUB) is
– We have a brewery in Argentina, and number one brewer by market share. the second largest Australian brewer.
we export to Chile and Paraguay. – We produce Coca-Cola products in 23 – We are the second largest brewer
– We produce soft drinks across the of our African markets (with Castel in in India.
region including Coca-Cola products 15 of these markets and through our – We have a brewery in Vietnam, and we
in El Salvador and Honduras. associated undertaking in Zimbabwe). export to numerous markets including
South Korea.
Read more on page 18 Read more on page 22
Read more on page 26
SABMiller plc Annual Report 2016 3
STRATEGIC REPORT
Chairman’s statement
The AB InBev offer values the company at US$106 billion,
representing a total return to shareholders of about 1,500% since
listing in London in 1999. This is a tremendous achievement.”
Dear shareholder
The recommended offer from AB InBev
has naturally made this a momentous year
for your company. The proposed transaction
has inevitably been a distraction for the
senior leadership team and potentially for the
entire organisation, which is why it gives me
so much pleasure to report on another year
of strong underlying business performance.
Notwithstanding the impact of the transaction
and a volatile economic environment, we
achieved beverage volume growth of 2% and
group net producer revenue (NPR) and EBITA
growth, on an organic, constant currency
basis, of 5% and 8%, respectively. EBITA
margin, as a percentage of group NPR, on
the same basis, expanded by 60 basis points,
enabled by both top line performance and
by our cost reduction and productivity
improvements. These results are driven by
our strategy to expand the beer category and
strengthen our brand portfolios through our
affordability and premiumisation initiatives,
supported by innovation. They tell us that we
have the right strategy and that it works.
The continued depreciation of key operating
currencies against the US dollar had an
adverse impact on our reported results.
Reported group NPR, EBITA and adjusted
EPS declined by 8%, 9% and 6%, respectively.
Despite these adverse currency movements,
we delivered free cash flow of US$2,969
million, which has enabled continued
investment in our growth markets in Africa
and Latin America. The strength of the
group’s performance amply justifies the
Total dividend payment board’s decision to recommend a final
dividend of 93.75 US cents per share,
122 US cents bringing the total dividend for the year to
122 US cents, an increase of 9 US cents
over the prior year.
(2015: 113 US cents)
On 11 November 2015, AB InBev announced
a recommended cash offer, with a partial
unlisted share and cash alternative, for your
company. The most important task for the
board in the year was our consideration of
this offer. The board’s initial rejection of terms
that it considered did not adequately value
SABMiller resulted ultimately in significantly
improved offer terms, after six increases,
before agreement was reached between
4 SABMiller plc Annual Report 2016
S
T
R
A
T
E
G
IC
R
E
P
O
R
The agreed cash T
SABMiller and AB InBev. Under the However, these impressive statistics tell only
offer represents a agreement, AB InBev has agreed to use part of the story. SABMiller has always aimed
its best efforts to secure the regulatory to play a positive role in the communities
significant premium clearances and authorisations necessary where it operates, right across the world.
to satisfy the pre-conditions and regulatory Our global sustainable development ambition
and cash return conditions to the transaction, with a break is called Prosper, and this sums up our
fee of US$3 billion being payable if these philosophy that when communities prosper,
for our shareholders, clearances are not achieved. The agreed our business prospers. Prosper includes
cash offer represents a significant premium commitments in five areas that promote:
securing early and cash return for our shareholders, accelerating growth throughout our value
securing early delivery of the company’s chain; responsible and moderate alcohol
delivery of the long-term value potential. consumption; secure water supplies;
reducing waste and carbon emissions;
company’s long-term At the time of writing, the transaction is and supporting farming. All of our Prosper
going through the regulatory processes initiatives are designed to protect our
value potential.” and good progress is being made. However, business and improve livelihoods, to support
until AB InBev’s offer is made to and long-term sustainable growth, and therefore
approved by shareholders, and the to create value for shareholders. It has been
transaction completes, the board remains a privilege over the past year to see for myself
focused on the need for our business to how deeply management and employees
continue to perform strongly and for our believe in SABMiller’s stated purpose: to
strategic objectives to be executed as an bring refreshment and sociability, improve
independent business. We have therefore livelihoods and help build local communities.
continued to uphold rigorous standards,
and in the corporate governance report I am honoured to acknowledge the role
on pages 54 to 69, there is a detailed played by successive boards over the years
description of the directors’ approach for their stewardship of the company and for
to corporate governance, our application their consistent support and encouragement
of the UK Corporate Governance Code, of management. I am also most grateful to
and our views on the role and effectiveness my fellow board members for their support,
of the board. commitment, skill and wisdom over the last
year, especially as we navigated the AB InBev
In the months before becoming Chairman, offer. There were a number of changes in the
I was delighted to have the opportunity to board this year: we welcomed our new CFO,
introduce myself to most of our major Domenic De Lorenzo, as well as two new
shareholders and to listen to their comments non-executive directors, Javier Ferrán and
and concerns. These meetings provided Dave Beran. Dave succeeded Howard Willard
invaluable background when, later in the as an Altria nominee to the board. Our sincere
year, I had to discuss with them the offer thanks to John Manser, John Manzoni
from AB InBev. Our conversations were open and Howard Willard for their invaluable
and constructive, and I am grateful to our contributions since joining the board in
shareholders for their continued support. 2001, 2004 and 2009, respectively.
SABMiller is an extraordinary success story. The board’s sincere thanks and
From its origins in Johannesburg in 1895, congratulations are due to our Chief
the group has grown to be a highly admired, Executive Alan Clark and the members
high-performing global beer and beverage of the executive committee, and indeed to
business. SABMiller has created significant our 70,000 people around the world, for
value for shareholders since listing on the their tremendous achievements over the
London Stock Exchange in 1999 with a last year. They have continued to execute
market capitalisation of US$5 billion. The our group strategy, maintaining the energy
group expanded through organic growth and momentum in our business, while
and a series of highly successful acquisitions dealing with the considerable distraction
and joint ventures on five continents. Today of the AB InBev offer. The performance
our unmatched footprint in fast-growing of our business is a testament to their
developing markets is underpinned by our unwavering focus on delivering for
portfolio of iconic national and global brands. consumers and shareholders.
The AB InBev offer values the company at
US$106 billion, representing a total return Jan du Plessis
to shareholders of about 1,500% since Chairman
listing in London in 1999, or a compound 10 June 2016
return of around 17.4% per year. This is
a tremendous achievement and a great
tribute to the vision of our leaders and the
commitment of our people around the world.
SABMiller plc Annual Report 2016 5
STRATEGIC REPORT
Chief Executive’s review
Our strong underlying performance reflects our focus on driving
superior growth by strengthening our core brands, expanding the
beer category to reach more consumers on more occasions, and
emphasising premiumisation.”
Business performance
We achieved strong underlying performance
for the year. We grew EBITA across all
regions and our group EBITA margin
improved through the year, on an underlying
basis. This performance reflects our focus on
driving superior growth by strengthening our
core brands, expanding the beer category to
reach more consumers on more occasions,
and placing an emphasis on premiumisation
in all regions. As noted through the year, the
strengthening of the US dollar against our
operating currencies had a material negative
impact on reported results.
Our affordability and premiumisation
initiatives have allowed us to capture growth
in developing markets and capitalise on key
trends in developed markets. Our subsidiaries
achieved organic volume growth of 5% and
NPR growth of 8% on an organic, constant
currency basis, with a particularly good
performance in a number of key markets.
This was offset by a more muted
performance in our associates and joint
ventures held back by headwinds in their
major markets and continued weak industry
trends in the USA, such that group NPR grew
by 5% on the same basis. Premium lager
brands’ NPR grew by 12%1 and global lager
brands’ NPR grew by 13%1, both on a
constant currency basis, with growth across
all regions. Our underlying growth accelerated
in the year, driven by improving momentum
in Latin America, continued strong and
well-balanced momentum in Africa, and
improvements in Australia and Europe in
the second half. On a reported basis, group
NPR and EBITA declined by 8% and 9%,
respectively, reflecting the depreciation of
our key operating currencies against the
US dollar.
1 O n a subsidiary basis, excluding home markets for
global brands.
6 SABMiller plc Annual Report 2016