South Africa: Beer South Africa shows a 1 percent overall increase in beer volumes

Beer South Africa, the local division of SABMiller, the second-largest beer group in the world, divides the local population into three categories - the have-lots, the haves and the have-nots, The Business Report posted May 19.

The have-nots are largely blue-collar workers and make up the core of Beer SA's consumers. This core segment of the market accounts for about 80 percent of beer volumes sold by Beer SA.

In the 12 months to the end of March, there was a marginal reduction in the volumes sold in this core segment. It was the first volume reduction in this end of the market since financial 2001.

Tony van Kralingen, Beer SA's managing director, said that this indicated that the have-nots were not sharing the benefits of the country's economic growth. He believed that the government's efforts with regard to the accelerated share growth initiative of South Africa and the increasing focus on infrastructure development should help to see the have-nots enjoying some of the benefits of economic growth in the future.

However, it certainly seems that the have-lots and haves are reaping the benefits of economic growth, as there was a 45 percent volume growth in premium beer brands.

This helped to counter the weak performance in the core brands and enabled Beer SA to show a 1 percent overall increase in beer volumes. Volumes of soft drinks, primarily Coca-Cola, rose 5 percent.

The volume increase underpinned an 8 percent increase in revenue to US$4.3 billion (R27.3 billion) from the South African operations of SABMiller. The same operations produced a 14 percent hike in earnings before interest, tax and amortisation (EBITA).

The local operations were the single largest contributor to SABMiller's total EBITA of US$2.9 billion, which was up 23 percent on the previous year's US$2.4 billion.

This was achieved on a 19 percent increase in revenue to US$15.3 billion. A more than doubling in net finance costs following the acquisition of South American-based Bavaria saw group profit before tax down 4 percent to US$2.4 billion.

Basic earnings a share slumped 16 percent to US$1.05.

But adjusted earnings rose 8 percent to US$1.091. The adjustments relate to gains in North America in financial 2005 on changes to post-retirement plans, as well as profits on the sale of investments in Africa and Asia.

The dividend of 44c a share is up 16 percent on the previous year's.

The weakest performance was reported in North America, where SABMiller's Miller business was squeezed by the aggressive pricing strategy of Anheuser Busch's Budweiser. EBITA in North America was down 7 percent to $454 million.

Group chief executive Graham Mackay said Miller had concluded its initial turnaround programme and was now a "more able and vigorous competitor in the US market".

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