SABMiller cash spurts on price hikes

Johannesburg – Brewing giant SABMiller [JSE:SAB] has boosted its cash generation by $2bn (about R15bn) as a result of improving market conditions and lower input costs, while it raised the prices of its own products.

Reporting annual results for the period to end-March on Thursday, SABMiller posted a 4% increase in revenue to make up a total net profit of $2.5bn, a 21.5% improvement on the previous year.

SABMiller sold the same amount of lager as the previous year at 213m hectoliters (hl). Beverages were also unchanged at 261h,l while soft drink volumes were 2% higher.

"Sales were supported by share gains in many markets, and group revenue grew 4% driven by price increases taken principally in the prior year and selectively in the current year," said SABMiller.

The favourable conditions enabled the company to reduce its debt by $311m to $8.4bn. The strong cash flow, together with a weaker US currency, were credited by SABMiller as mitigating factors. Lower debt resulted in a lower gearing ratio, which fell to 41% from 54% in the prior year.

SABMiller declared a 51 US cent dividend, a 17% improvement on the prior year.

Latin America was the strongest performer with 18% growth in earnings before interest, tax, depreciation and amortisation obtained from organic growth. "Despite challenging trading conditions for much of the year, lager volumes grew 3%, supported by good growth in the final quarter as economies showed signs of improvement," said SABMiller about the region.

Less beer was consumed in Europe as lager volumes declined 5%. "Against this backdrop, we gained market share in Poland and Romania and held share in the Czech Republic and Russia."

While revenue in the SA market grew 21%, lager and soft drink volumes declined 1%. SABMiller’s black economic empowerment deal in SA cost $11m. "The economic environment in SA remained challenging throughout the year with declining consumer demand, despite a return to GDP [gross domestic product] growth during the last quarter of calendar 2009," said SABMiller.