Imara African Cement Report Africa, the last cement frontier Angola ...

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Breweries and Beverages Sector – A thirsty lot The booming beverages sector opens up to new players Angola has the third largest domestic market for alcoholic beverages in sub-Saharan Africa after South Africa and Nigeria, yet despite this it still has significant growth potential. Nigeria, which is second only to South Africa, has immense potential, however, installed capacity is currently meeting demand. Angola‟s market is undersupplied, and the dominant duopoly brewer, Cuca, has grown exponentially in the six years since privatisation. With stabilization and growing domestic demand, the beverages sector is opening up. In 2010 SABMiller opened a new US$135m brewery and soft drinks plant in Luanda and their Castle and N’gola brands are gaining traction. Portugal‟s Unicer is still being held at bay, however, through imports they supply the bulk of the country‟s production deficit. Angola‟s higher than average per capita consumption, at over 59 litres per capita per annum Angola has one of the highest per capita consumption levels in Africa, only surpassed by Botswana, Namibia and South Africa. Bear in mind that Angola is virtually a cash economy with a still underdeveloped consumer credit industry. Consequently, domestic consumption is funded by disposable cash flows, which indicates a large and growing middle class. The strong beer consumption statistics are also indicative of the long established Lusophone cultural influence. A bullish outlook for consumer industries is supported by a bottom heavy population distribution where an estimated 43% of the population is under 14 years of age, with over 60% of Angolans living in urban areas. The re-emergence of the agricultural sector, together with rising employment and continued expansion of the non-oil economy buttresses a strong case for Angola‟s beverage sector. In 2010 SABMiller and Unicer entered the fray, and the breweries they are building will boost installed lager capacity to somewhere in the region of 7.5 m HL, however, compared to current demand of 8.9m hl. We use regional proxies as an approximation of size, and would approximate a minimum value for Cuca in the region of US$ 2.4bn (EV/hl of US$395). Having higher growth potential than most other SSA countries, we would not be against using Nigerian Breweries as a specific peer, in which case a ball park valuation, factoring in strong growth characteristics, would be in the region of US$2.6bn (EV/hl of US$432). The details are provided per table 11. Companhia União de Cervejas de Angola (CUCA): Living up to the nickname ‘Ferrari’ Cuca is Angola‟s largest beer and beverages manufacturer, boasting a 68% share of the local beer market, distributed country wide under the brands Cuca, Nokal and Eka. The company is owned by the French beverages giant Group BGI (Castel), who have a partnership with the MPLA‟s financial investment company, GEFI. The group consists of 7 factories and 4 000 employees; in 2002 the Cuca factory in Luanda was privatized, then in 2003 the Nokal (Luanda) brewery was acquired, quickly followed by the acquisition of Eka (in Dondo – Cuanza Norte) in the same year. In 2004 the Soba brewery in Catumbela was opened in the Benguela province that started production with an installed capacity of 600 000 HL per year. In 2005, yet another brewery was opened in the Cabinda province, and the latest development was the construction of a new plant called Cobeje (Bom Jesus in Bengo), which started production in under five months. In less than a year, the brewery‟s production reached 1,3m HL per year, taking the total group capacity to 6m HL. The biggest constraint for the brewery sector is the sourcing of raw materials which are mostly imported. The resuscitation of the agricultural sector will, with time, improve local availability of raw materials. SABMiller: Enter the big guns SABMiller, the world‟s second largest brewer, is growing their presence in Angola from scratch and their operational presence and activities have been stepped up considerably. SABMiller invested in a new brewery increasing capacity to 1m HL and in their 2011 annual report they reported that lager volumes had increased by 26% following the successful commissioning of the new Luanda plant. The group is currently operating in both the CSD bottling and beer brewing markets, with an installed capacity of 2,5m HL for soft drinks and 0,82m HL for lager. The group operates through the following companies and has the following shareholdings, with the remainder being owned by local Angolan shareholders: Company Name Effective interest Coca Cola Bottling Luanda SARL 28% Coca Cola Bottling Sul de Angola SARL 37% Empresa de Cervejas N‟Gola SARL 28% The brands marketed in Angola include Castle, Carling Black Label, and Redd‟s. The group also has a partnership agreement with the BGI group to distribute Cuca products in the Malanje region. SABMiller has commenced the construction of a brewery in North Luanda which will allow them to compete in the fast growing beer market in that part of the country. The group has announced plans to invest US$125m to set up a 33
Millions of Hectolitres NB Delta Cuca EABL Guinness NG Nambrew Sechaba Solibra Natbrew Zambrew SBM Guinness GN Bralirwa Per capita income US$ Sechaba SABMiller Cuca Nambrew SBM Natbrew Zambrew Solibra NB Guinness NG EABL Guiness GH Delta Bralirwa Consumption in litres brewery employing 500 people and with a capacity to produce 600k HL per year. The commissioning of this brewery commenced in late 2009. Unicer: Import substitution to improve group margins Unicer is the market leader in Portugal with a market share of over half of the Portuguese market. In Africa, Unicer‟s strategy is to consolidate its position in Lusophone countries (Angola, Cape Verde, Mozambique, and Guinea Bissau), where it has a marked legacy/language advantage. On the 29th of January 2009 Unicer announced plans that it would commence the construction of a 1m HL brewery in Angola with an initial €120m investment. The group‟s application to open up a factory was initially presented in 2005, however, the pre-requisite of a local partner had not been met. Three Angolan partners have since been shortlisted for this project and the brewery is expected to commence production in 2011 and is expected to reach full production by 2013/14. Table 15: Comparison of Cuca with African Peers Unicer is the largest Portuguese beverages exporter to Angola, representing 70% of the total beer imports into Weighted Angola. In 2009, Unicer imports into Guinness Angola Guinness reached a figure of 1.33m HL, (≈1 500 containers/month), Average of which Bralirwa Cuca Delta EABL GH NG Nambrew NB Natbrew SABMiller Sechaba SBM Solibra Zambrew (Excl. SA) 1.25m HL was beer in the guise of Super Bock, Cristal and Carlsberg and the balance, was fizzy and still water under the Country„Caramulo’ Rwanda brand. Angola Zimbabwe Kenya Ghana Nigeria Namibia Nigeria Zambia South Africa Botswana Morocco Cote d'Ivoire Zambia Parent Heineken Castel SABMiller Diageo Diageo Diageo Heineken Heineken SABMiller SABMiller SABMiller Castel SABMiller Population (m) 10.1 18.3 12.5 40.0 23.8 78.0 b 2.1 78.0 b 12.9 49.1 2.0 31.9 20.6 12.9 Capacity (mhl) 0.9 6.0 8.5 a 5.8 1.1 4.5 3.0 10.0 1.5 50.0 c 2.5 1.1 2.0 1.3 Production (mhl) 0.9 8.9 5.8 a 4.7 0.9 4.2 2.0 5.0 1.5 45.3 c 2.4 1.1 1.8 1.0 Per capita capacity (litres) 8.9 32.8 68.0 14.5 4.6 5.8 142.3 12.8 11.6 101.9 125.6 3.4 9.7 9.7 21.1 Per capita cons. (litres) 8.9 59.4 46.2 11.8 3.8 5.4 94.8 6.4 11.2 92.4 119.2 3.4 8.9 7.8 14.8 Per capita GDP (US$) 519.3 4,549 640.0 818 651 1,112 3,690 1,112 1,181 5,855 6,937 2,875 1,153 1,181 1,258.0 Capacity Utilisation 100% 148% 68% 81% 83% 93% 67% 50% 97% 91% 95% 100% 92% 80% 71% Market Cap (LCUm) 69,942.8 n/a 944 164,481 214 360,619 1,687 698,403 437,976 57,084 d 1,533 3,076 127,272 964,964 Market Cap (US$m) 117.4 n/a 944 1,868 134 2,308 250 4,469 91 57,084 d 235 363 275 200 Enterprise Value/hl ($) 124 n/a 114 358 131 547 90 432 92 239 d 88 316 146 266 381.2 Enterprise Value/EBITDA Hist 3.9 n/a 11.8 12.4 5.9 14.1 4.7 13.3 7.9 14.4 5.3 11.3 4.1 10.7 12.3 T + 1 3.3 n/a 10.0 9.9 6.4 13.3 4.7 13.4 6.6 13.9 4.8 6.8 4.4 8.9 11.5 T + 2 2.6 n/a 8.5 9.4 6.0 10.6 4.2 14.4 5.6 13.1 4.1 6.8 4.4 7.5 11.0 Sales Growth (%) Hist 16.1 35.0 25.7 10.3 2.8 22.7 10.4 13.2 21.2 7.7 7.6 0.9 12.7 24.4 15.3 T + 1 21.0 30.0 20.0 10.0 5.0 15.0 10.4 23.8 20.0 5.0 5.0 0.9 12.7 20.0 17.3 T + 2 21.0 30.0 20.0 8.0 8.0 15.0 10.4 10.0 20.0 5.0 5.0 0.9 1.1 20.0 11.2 PBV Hist 5.7 n/a 4.4 7.9 3.6 10.6 2.4 15.0 16.3 2.6 8.0 - 2.1 4.6 10.4 T + 1 3.4 n/a 3.4 7.7 4.5 10.1 2.1 15.0 13.6 2.8 5.4 - 1.9 5.0 10.1 T + 2 2.7 n/a 2.7 7.4 6.1 9.6 1.9 15.0 11.3 2.5 4.1 - 1.7 4.7 9.9 Dividend Yield Hist 0.0% n/a 1.9% 3.9% 0.0% 3.1% 4.8% 4.3% 7.1% 2.3% 7.7% 0.0% 6.5% 1.9% 3.7% T + 1 1.3% n/a 1.9% 4.9% 4.5% 4.3% 5.5% 5.6% 8.5% 2.3% 8.1% 0.0% 6.6% -0.1% 4.7% T + 2 1.6% n/a 2.3% 5.1% 4.9% 5.0% 6.0% 6.1% 10.2% 2.4% 8.5% 0.0% 6.7% 1.6% 5.2% EBITDA margin (%) Hist 32.6% n/a 20.0% 34.8% 18.7% 22.7% 20.5% 29.2% 24.7% 23.0% 23.1% 27.3% 29.8% 14.8% 27.2% T + 1 33.9% n/a 19.7% 39.7% 17.9% 21.0% 20.5% 28.7% 24.5% 23.7% 23.0% 44.8% 29.6% 14.8% 28.0% T + 2 35.2% n/a 19.4% 38.7% 18.0% 22.6% 20.5% 28.6% 24.3% 24.4% 22.8% 44.8% 29.4% 14.8% 28.1% a Capacity: Lager beer: 2m HL; Sorghum/Opaque beer: 5.1m HL. Production: Beer 1.6m HL; Sorghum/Opaque 3.0m HL b Addressable population halved to reflect strong Muslim influence that has a negative effect on alcohol consumption levels c Capacity and Production figures for SA only give a feel for the potential consumption stats for the rest of Africa d Based on total total SABMiller Group. Production of 270.1m HL for FY 2011; Capacity figure not available 12.00 10.00 8.00 6.00 4.00 2.00 - Figure 32: African Breweries Capacity/Production Angola's monopoly brewer Cuca (CGI/Castel sub) is operating at full capacity. SABMiller is expanding and Unicer is due to build a brewery 4m HL to the sector's capacity, currently being met by imports. 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Figure 33: Per capita income vs consumption As a cash economy per capita incomes in Angola have significnat upside. Zimbabwean GDP seems understated due to a large informal market and diaspora inflows. 140 120 100 80 60 40 20 0 Capacity (mhl) Production (mhl) Source: ISA Per capita GDP (US$) Per capita consumption (litres) Source: ISA 34
Page 1 and 2: Angola Imara African Country Cement
Page 3 and 4: Angola Country Map 11a 1 9a a 8 5 2
Page 5 and 6: Executive Summary Comeback post 201
Page 7 and 8: Table 1: Timeline for major policy
Page 9 and 10: Table 3: 2011 Budget and Q1 income/
Page 11 and 12: Constraints to the growth story Ang
Page 13 and 14: US$ Millions US$ per barrel over 10
Page 15 and 16: Chevron also holds a 38.1% interest
Page 17 and 18: Italy Although Italy‟s oil intere
Page 19 and 20: SONANGOL: Angola’s de facto Sover
Page 21 and 22: Oil Majors in Angola´s Petroleum S
Page 23 and 24: In January 2011, Eni was awarded ri
Page 25 and 26: BAI BFA BESA BPC Banco BIC BESA Ban
Page 27 and 28: Table 9: Regional Banking Comparati
Page 29 and 30: Arguments for and against the devel
Page 31 and 32: Orascom Mobinil TNM Safaricom Econe
Page 33: Telephonic listings of Angola (ELTA
Page 37 and 38: Hotels, Tourism and Construction Ov
Page 39 and 40: • Kinaxixi Shopping Center and Of
Page 41: Capital Securities Botswana Ground

Imara African Cement Report Africa, the last cement frontier Angola ...

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