Annual Report - SABMiller India

Double digit organic constant currency growth in EBITA was achievedby Europe, North America and Africa & Asia.EBITA margin performance(%) Organic constant currency basis 200740302010LatinAmericaSource: SABMiller plc 2008EuropeNorthAmericain volumes has been 5.6%. The group hasleveraged volume growth through priceand mix benefits to generate compoundannual group revenue growth of 9.3%over that period.Input costsInput cost pressures have been significantin the past year. Most notably there havebeen substantial increases in the marketprices of malt, barley and hops. The priceof malt and barley has more than doubledin the last two years, while the price ofhops has increased by seven to ten timesover the same period, with a significantspike in the last 12 months in particular.The impact of this on profitability has beentempered through supply contracts forfuture requirements and an active hedgingprogramme, combined with programmesto support development of local barleyfarming in both Africa and India,underpinning our supply in these areas.As a consequence the impact of inputcost increases has been more muted, withtotal raw material costs increasing 9% perhl in constant currency. Our total cost ofgoods sold per hl, which includes othervariable costs, is up about 6% on thesame basis reflecting the lower costpressures experienced on other inputs.EBITAEBITA is defined as operating profitbefore exceptional items and amortisationof intangible assets (excluding software).It includes the group’s share of associates’operating profit on a similar basis. Wechoose to report EBITA in our results inorder to accord with the manner in whichAfrica &AsiaSA BeveragesHotels &Gaming2008Groupthe group is managed. SABMiller believesthat the reported EBITA profit measuresgive shareholders additional informationon trends and make it easier tocompare different segments. Segmentalperformance is reported after the specificapportionment of attributable head officeservice costs.The chart above shows the organicincrease in EBITA for each of the last fouryears with each year’s performance shownin constant currency. EBITA grew 9% onan organic, constant currency basis.Reported EBITA, which includes the impactof currency movements and acquisitions,grew by 15% to US$4,141 million. Growthin EBITA reflects the benefits of volume andrevenue increases as well as productivity.The group has a record of improving itsproductivity over time, notwithstandingincreases in capital investment and insales and marketing expenses which canimpact productivity in any individual year.Double digit organic constant currencygrowth in EBITA was achieved by Europe,North America and Africa & Asia, whichenabled the group to absorb the EBITAdecline in South Africa and still achievea good overall performance for the year.Latin America is now the largest beveragesegment, contributing 25% of group EBITAand this represents the significant progressmade by the group in developing abalanced portfolio of businesses.EBITA marginThe group has a strong record in protectingand developing profitability to raise theperformance of local businesses, as seenEBITA growth(%) Organic constant currency basis201510505*Source: SABMiller plc 200806 07 08*UK GAAPin group EBITA margin trends in thechart above. In this year of significantlyrising input costs, revenue growthand production efficiencies enabled thegroup to recover the increases in costsexperienced and the group has maintainedits EBITA margin at 17.4%. This is anoteworthy achievement. In addition tothe input price pressures experiencedthe group suffered the adverse impact onvolume and mix of the loss to a competitorof the licence to produce a premium brandwhich had previously accounted for 9% ofvolumes in South Africa.+9%EBITA growth on organicconstant currency basisThe group’s reported EBITA marginon an organic constant currency basisis 10 basis points lower, as currencymovements that have favoured theweighting of higher margin businessesin the group total are excluded fromthis measure.The group has continued investmentin future growth, particularly capacityexpansion, and also in brand supportand sales capability. There has alsobeen a focus on productivity and costmanagement. Overall this investmenthas led to some incremental cost inEBITA margin.Overview Operating and financial review Governance Financial statements Shareholder informationChief Financial Officer’s review 19SABMiller plc Annual Report 2008