SAB takes a knock

Adele Shevel

Adele Shevel

South Africa was a more difficult and challenging trading environment because of a changing society, a faltering economy and more competition, Graham Mackay, chief executive of SABMiller, said yesterday.

Presenting SABMiller's annual results ending in March, he said SAB (the South African business) continues to address the loss of market share with the withdrawal of the Amstel brand.

Market share is nearly 90percent in South Africa, but less than previous highs.

SAB's revenue grew 11percent but pre-tax earnings dropped eight percent because of spiking commodity and energy costs, and higher inflation.

SA beverages earnings fell 26percent in dollar terms, hurt by the two percent drop in beer volumes. The mainstream category, which accounts for most lager sales, grew supported by strong performance by Hansa Pilsner and Castle Lager.

Lager volumes were two percent lower, affected largely by the absence of Easter trading in the reporting period, a decline in premium and flavoured alcoholic beverage volumes and shifting regulations on alcohol.

Several factors have substantially slowed SAB's growth and lowered profitability.

Norman Adami, the managing director of SAB, said South Africa offered "remarkable growth potential".

Underpinning this is solid population growth, the fact that SA is well positioned relative to the rest of the world, consumption of alcohol is still low per capita, and the culture is naturally disposed to the sociability of beer.

The group developed a strategy to restore momentum to the business on a sustained basis, which was unveiled to investors in March. "We're already starting to see benefits," said Adami.

Meanwhile, parent company SABMiller said profit declined seven percent as beer consumption fell in emerging markets and dollar strength affected earnings from developing countries.