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Johann van Zyl

Beverages

Jun 02 2010 15:46
The companies in the JSE’s beverages sector – the two breweries, Distell and SABMiller, and the two distillers and vintners, Distell and Capevin (formerly KWV Beleggings) – were all doing considerably better in February this year than they were in February 2009.

It’s the second consecutive year this sector is doing its share, because when most other listed companies sank back seriously in 2008/2009 it was one of the few exceptions that did well that year.

Late in February 2009 the sector’s market capitalisation was R259bn and at the time of writing (at end-February this year) it was R347bn, a healthy 34% better.

Even the small Awethu brewery, whose share price rose from 8c to 10c, was better off.

Its market capitalisation consequently increased from about R6m to R8m.

That’s small change compared with SABMiller, one of the biggest listed companies on the JSE.

Drowning its sorrows

With its market value currently at around R330.5bn – a hefty 35% higher than the R243.5bn of last February – the brewer isn’t only big in the local market but one of the world’s biggest breweries.

It’s currently active in more than 60 countries on six continents.

In its latest full financial year to end-September last year, SABMiller could, of course, not maintain its consistent growth of around $3bn a year of the previous five years.

In this financial year it fell by around R2.7bn to R18.7bn, with its attributable profit again slightly below the golden $2bn.

However, few companies would complain about a figure like that.

With its price recently around R200, as against the approximately R161/share of February last year, there are some – such as technical analyst Colin Abrams – who feel SABMiller could soon perhaps rise to R240 or even R270/share before the next bear market hits the JSE.

So if you’re wondering which share to buy and hold don’t look further than SABMiller.

Both beverage groups Distell and Capevin this year also boasted higher share prices than in February last year, though not to the same extent as SABMiller.

Distell’s price at R66/share was about 10% better, while Capevin had risen around 6%.

It’s noticeable Capevin’s attributable profit to end-June last year was almost the same as the previous year’s, after growing steadily in both turnover and profit since its 2004 financial year.

Steady as she goes

Over those few years its earnings per share increased from 252c in 2004 to 660c in its 2009 financial year.

The ups and downs of Capevin, which changed its name in August 2009, are now intertwined with those of Distell: as an investment company, it owns 50% of the issued share capital of Remgro/KWV and that company owns 58.5% of the Distell group.

Distell, now one decade old after the merger of Distillers and SFW, has also been one of the market’s stalwarts over the past few years.

That’s why its attributable profit increased strongly and consistently, from R361m in 2004 to R954m in its financial year to end-June 2009.

In the difficult 2009 financial year it even succeeded in pushing up its turnover with an impressive 15% to R10.9bn.
 
With popular wines such as Nederburg, Alto, Fleur de Cap, Chateau Libertas, Zonnebloem and even Tassenberg and other well-known names (liqueur favourite Amarula and Savanna, Klipdrift and Richelieu), you can only drink a toast to Distell’s ongoing good performance.

Another plus: both Distell and Capevin already sell a considerable number of their brands overseas and a weaker rand and perhaps a few visiting fans sampling its output during the Soccer World Cup could benefit the group further.

Looking at Awethu, this company – formed and listed in 1997 – pushed its attributable profit in its financial year to end-June 2009 up by 9% to R787 000 on turnover of R17.7m.

Looking good

However, its turnover growth was considerably higher – around 24%, which means its profit did not grow at the same rate as turnover.

Its market, which is strongly focused on the informal, mining and catering groups, also differs considerably from those of the other three, far larger listed companies in the sector, which obviously attract the cream of investments.

As mentioned, many of the big guns also started small and Awethu is already quite a few million better off than in, for example, 2006, when its turnover was a mere R2.2m and attributable loss R1m.

 - Finweek

sabmiller  |  distell group  |  investment
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