Overhead productivity - SABMiller

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Overhead productivity - SABMiller

Agenda

• Key Performance Indicators

• Volume and Market Dynamics

• Operational Review

• Senior Management Changes

• Sustainable Development Review

• Financial Results

• Strategic Focus and Outlook


SA Territory


Key Performance Indicators

• Total Volume Growth – +6.0%

• SA Volume growth – +6.6%



CSD – +6.3%

Alternative Beverages – +14.0%

• EBITA growth – +12.2%

• Adjusted headline earnings growth – +21.3%

Overhead productivity – +2.4%

• Employment Equity – 40% of executive management

(37% at previous year-end)

• Safety, Health, Environment and Quality Ratings

improved


Volume and Market Dynamics

• Volume Drivers

– Timing of Easter Holidays

– Pack and flavour innovations

– Increased disposable income from tax relief and

interest rate cuts

– Effective operational performance

• Growth in both emerging and developed markets

• KwaZulu-Natal volume positive/buoyant vs same period

last year.


Brand and Package Performance

• Coca-Cola

– Strong growth by brand Coca-Cola. Aided by Vanilla

Coke introduction.

• Fanta

– Growth slowed but still the best performing brand.

Fanta Pineapple now outsells Fanta Orange.

• Alternative Beverages

– Strong growth in the Replenishment and Health &

Nutrition categories of Water (Valpre & Bon Aqua),

Powerade, Appletiser and Milo RTD.


Brand and Package Performance

• Bibo

– Bibo cordial (7 + 1) introduction progressing well,

although early days. The decline in Bibo RTD (200ml

pouch) is now being cycled out. The step decline

occurred during June/July 2002.

• Pack Performance

– Strong growth in 2000ml PET was underpinned by

growth in 1250ml RGB. 300ml RGB is performing

above expectations. 1000ml PET growth continues

whilst cans now slightly positive, aided by the 450ml

can.


Channel Dynamics

– Strong growth experienced in the Hyper,

Super & Superette channels. In addition,

demand for 1250ml RGB and strong 300ml

RGB demand translated into good growth in

the 3 rd Party channels.

– Local and Traditional Grocer (Spaza shops)

and the PFM channels also reflected

reasonable growth.

– The long term trend of increased sales

contribution to National Account customers

continued.


Competition

• House Brands and ‘B’ brands

– KwaZulu-Natal impacted

– Predominantly 2litre PET

• Pepsi

– distribution increasing

– some off-take in Supers and Hypers


Operational Review

– Manufacturing reliability and asset utilisation

– Distribution route-to-market strategy

– Increase in owner-driver complement

– Improvements in Supply Chain Management – logistics,

planning, procurement


Senior Management Changes

Audrey Lemmert

HR Director

CIO

Cunning Gangeni

G.M. at our Bedfordview S&D

Operation. Holds an MBA and

Associate member of ACCA UK.

Previously senior IT Executive in a

large financial services organisation.

Holds a BSc Honours in Physics &

Computer Science and currently

completing an MBA.


Sustainable Development Review

• Competency development combined with talent

acquisition

• Safety, health, quality and environment focus

– Further improvements in product quality

– NOSA / ISO 14001 accreditation

• Industrial Relations climate stable

• Participation in JSE Social Responsibility Index (JSE

SRI)


Sustainable Development Review

• Comprehensive Hiv/Aids Management programme

implemented in September 2002

– Voluntary counselling and testing

– Communication, awareness and peer education

– Treatment programme at company expense,

including anti-retroviral therapy


Financial Results


Financial Overview

Drivers of financial results:

• Strong volume growth

• Gross margin percentage declines

– Input costs increased by 13%

– Pack mix changes

Overhead productivity realised

Overhead productivity gains

– Offset to some extent by container write-down of

R29 million

• Interest received

– Net finance income of R40 million

• Associate earnings up on prior year

– Increase of 20%


Financial Overview

Margin as a percentage of

Sales Revenue

H04

H03

% %

EBITDA 15.6 13.6

EBITA 9.8 9.9

EBIT 8.1 8.0

• EBITDA up 21.7%

• EBITA up 12.2%

• EBIT up 15.1%


Cash Flow Statements

• Cash generated from operations increased by 10.9%

– Working capital improvement R20m below prior year

– However, increase in prepayments and inventories

• Cash taxes and dividend paid increases by R121 million

– Dividends up R74 million

– Cash taxes up R47 million

• Net capital investments – R248 million

– Growth & replenishment of container float

– Pretoria warehouse expansion

• Decrease in cash on hand of R306 million from March

2003 year-end balance


Balance Sheet

• Investment in property plant and equipment increases

by a net R24 million

– High container float purchases to meet demand

• Working Capital decreases by R88 million

– Trade receivables decline

– Prepayments increase to R101 million due to container

expansion

– Trade payables increased


Strategic Focus and Outlook


Strategic Focus

Strategic Themes

• Strengthen market share of CSDs and selected new

product categories

– Operational execution

– Brand/pack innovations

– Emerging market opportunities

• Customer strategy

– Customised service packages

– Improved planning/reduced out-of-stocks

– Invoicing technology

– Greater emphasis on “on-premise” capability


Strategic Focus

Strategic Themes

• Financial Efficiency and Effectiveness

– Distribution opportunities

– Information technology

– Procurement general spend

• Human capital development

– Performance and capacity

– Competency acquisition focus

– Diversity


Outlook (as presented at year-end)

• Continued volume growth is achievable

– Easter volumes encouraging

– AB focus will deliver continued growth

Interim results

+6%

+14%

• Competitor activity

– Plan actioned to counter post CWC

availability

Overhead productivity planned

– Distribution efficiencies


+2.4%

R4m so far


Outlook

• Volume growth momentum

– Strong peak promotional activity

– Alternative Beverage momentum

• Competitors

– ‘B’ brands / International competitor

Overheads/costs

– Productivity in distribution

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