Zambrew and Natbrew HY 2016 financial results presentation

Zambian Breweries Plc. Investor conference call

26 November 2015

F16 Half year results

© SABMiller 2014

Forward Looking Statements

This presentation includes ‘forward-looking statements’ with respect to certain of SABMiller plc’s plans, current goals and expectations

relating to its future financial condition, performance and results. These statements contain the words “anticipate”, “believe”, “intend”,

“estimate”, “expect” and words of similar meaning. All statements other than statements of historical facts included in this presentation,

including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management

for future operations (including development plans and objectives relating to the Company’s products and services) are forward-

looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that

could cause the actual results, performance or achievements of the Company to be materially different from future results,

performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based

on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the

Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company

expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained

herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances

on which any such statement is based. The past business and financial performance of SABMiller plc is not to be relied on as an

indication of its future performance.

All references to “EBITA” in this presentation refer to earnings before interest, tax, amortisation of intangible assets (excluding

software) and exceptional items. EBITA also includes the group’s share of associates’ and joint ventures’ EBITA on the same basis.

All references to “organic” mean as adjusted to exclude the impact of acquisitions and disposals, while all references to “constant

currency” mean as adjusted to exclude the impact of movements in foreign currency exchange rates in the translation of our results.

References to “underlying” mean in organic, constant currency.

2Zambian Breweries Plc

© SABMiller 2014

Agenda

1. Welcome

2. Trading and business environment

3. Strategic review

4. Managing sustainable development

5. Financial highlights

6. CAPEX

7. Prospects

3Zambian Breweries Plc.

Investing in our $33m Maltings plant in the Lusaka south Multi

Facility Economic Zone

© SABMiller 2014

Trading and business environment Good local currency results despite a tough economic climate and challenging trading conditions

Affordability became more relevant in the period. Volumes grew off the back of an 8% price decrease on

mainstream beer with the economy 750ml pack contributing to beer growth. Eagle Lager which is priced

at 67% of mainstream grew by 72%

Continued lack of enforcement at the borders allowed Castle Lite smuggling on a large scale

Re entry into the AFB category in a much stronger way with Flying Fish and Redds Vodka Lemon

Constraints on disposable income for soft drink consumers and changing consumer preferences

CSD sales returned to year on year growth in September

We have taken market share in both categories in the period

Embarked on significant government and key stakeholder engagement

Excise break on clear beer from 60% to 40% effective 1 Jan announced in early October

Local and US$ reported results significantly negatively impacted by the depreciating Kwacha.

Zambian Breweries Plc 4

© SABMiller 2014

Strategic review Real business focus on five key pillars in the period to deliver the growth

Competitiveness

Developing a sales lead organisation

Fostering a performance culture

Improving our corporate reputation

Cost leadership

Excise relief from 1 Jan 2016 will allow us to drive affordability while making long term business

decisions for investment.

Continue to focus on dry area penetration and MDC models to capture new growth complimented by a

sustainable credit offering.

Zambian Breweries Plc. 5

© SABMiller 2014 6

Five worlds, five shared imperatives

a thriving world a sociable world a resilient world a clean world a productive world

Zambian Breweries Plc.

Itawa Water Springs Manja Pamodzi

project

Mama Mpapa project Barley and the

Maltings

Responsible

retailers

Financial Highlights

© SABMiller 2014

Financial highlights - against prior year – local currency

Lager volume growth + 21% largely driven by an 8% price reduction on 1 Jan, the

introduction of Castle and CBL 750ml packs and 72% Eagle growth.

Soft drinks volume growth -10% driven by the RGB performance after the 1 Jan increase.

Net producers revenue growth of +10% due to total volume growth & clear beer mix

impact.

Gross profit growth of +17% in LC (Improved Total Cost of Distribution and Total Cost of

Manufacturing)

Operating profit growth of +57% as a result of volume growth and an increased focus on

cost control.


© SABMiller 2014

Good hedging strategy in place has helped minimise the transactional exchange impact

Operating profit margin growth of +620bp as a percentage of NPR

Finance costs up by 9% reflecting increased borrowing rates. All debt is Kwacha

denominated

Profit after tax growth of +87%

Board approved a 75% interim dividend.


Financial highlights - against prior year – local currency

© SABMiller 2014

Financial performance – Half Year Ended 30th September 2015


ZMW'000 USD '000

Sep-15 Sep-14 Change % Sep-15 Sep-14 Change %

Reported

Net producers revenue (NPR) 711,410 646,487 10.0% 89,505 103,367 -13.4%

Operating profit 149,541 95,511 56.6% 18,814 15,271 23.2%

Operating profit % NPR 21.0% 14.8% 620bp 21.0% 14.8% 620bp

Sales volumes (Hl'000)

Total 1,072 998 7.5% 1,072 998 7.5%

Lager 666 548 21.4% 666 548 21.4%

Soft drinks 406 449 -9.5% 406 449 -9.5%

© SABMiller 2014



ZMW'000 USD '000


NPR 711,410 646,487 10.0% 89,505 103,367 -13.4%

Gross profit 374,047 318,728 17.4% 47,060 50,961 -7.7%

Gross margin (%NR) 52.6% 49.3% 330bp 52.6% 49.3% 330bp

Net operating expenses (224,533) (227,798) 1.4% (28,249) (36,423) 22.4%

Exchange gains/(Losses) (27) (4,581) 99.4% (3 ) (733) 99.5%

Operating profit 149,541 95,511 56.6% 18,814 15,271 23.2%

Finance costs (27,399) (25,186) -8.8% (3,447) (4,027) 14.4%

Profit before tax 122,142 70,325 73.7% 15,367 11,244 36.7%

Income tax expense (41,211) (27,036) -52.4% (5,185) (4,323) 19.9%

Profit for the year 80,931 43,289 87.0% 10,182 6,921 47.1%

© SABMiller 2014

Key financial ratios (US$ where applicable)


Per Hl Analysis F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 HY1

NPR/Hl 106.18 101.71 110.40 113.47 114.88 111.37 99.86 83.46

Gross profit/Hl 50.51 41.82 51.72 50.71 53.44 52.91 50.28 41.93

Fixed costs/Hl * 35.06 33.51 30.41 29.36 28.30 29.66 28.85 24.20

Operating profit/Hl 20.36 8.76 19.43 21.35 23.26 25.45 17.16 19.29

Ratios

Operating profit margin 19.2% 8.6% 17.6% 18.8% 20.2% 22.9% 17.2% 23.1%

Gross profit Margin 47.6% 41.1% 46.8% 44.7% 46.5% 47.5% 50.3% 50.2%

Interest cover ratio (times) 4.8 1.1 2.0 3.3 3.1 6.5 4.8 5.7

Effective tax rate 40.0% 118.8% 32.9% 40.8% 32.9% 30.1% 29.4% 30.1%

Return on assets 8.7% -0.1% 4.5% 5.3% 6.9% 10.9% 8.8% 7.5%

Return on equity 29.3% -0.4% 18.7% 11.5% 14.3% 20.7% 15.2% 12.7%

Return on Capital employed 18.5% 5.2% 13.6% 12.9% 15.2% 18.5% 13.4% 11.1%

Fixed Assets turnover ratio 1.3 0.8 1.0 1.0 1.0 1.1 1.1 0.7

Earning per share 0.03 (0.00) 0.02 0.03 0.04 0.059 0.04 0.02

Balance sheet ratios

Current ratio 0.46 0.50 0.93 0.68 1.20 1.19 0.65 0.75

Debt ratio 70% 80% 76% 54% 52% 47% 59% 57%

Debt - Equity ratio 2.4 4.1 3.2 1.2 1.1 0.9 1.0 1.0

Capitalisation ratio 26% 63% 67% 17% 38% 31% 32% 30%

*Fixed costs as per internal reporting

© SABMiller 2014

CAPEX


42,436

105,949 118,770

183,541

233,345

283,070 320,924

358,246

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

F'09 F'10 F'11 F'12 F'13 F'14 F'15 F16 Fcst

Cumulative Capex Spend (US$'000)

Capex (US$'000)

© SABMiller 2014

Prospects Anticipating a real slow down in Q4. Currency impact remains uncertain.

Power and water restrictions will remain a major concern and will add significant cost in the second half.

Focus areas will include ensuring affordability across all categories.

Castle Lite smuggling will come to an end in the period driving Castle Lite sales.

We will continue to closely manage costs to cope with the reality of the impact of the depreciated

Kwacha on our results.

Strategic infrastructure investments will go ahead as planned on the premise of future growth and

government positive response with the reduction of excise back to 40%.

Our Maltings plant will come on stream in March 2016.

Cassava value chain and the Eagle brand will be a top priority for the second half.

We continue to engage with SEC and LUSE to address the 75% shareholding requirement.Zambian Breweries Plc. 14

© SABMiller 2014

Thank you

Questions?


National Breweries Plc. Investor conference call

26 November 2015

F16 Half year results

© SABMiller 2014

Forward Looking Statements

This presentation includes ‘forward-looking statements’ with respect to certain of SABMiller plc’s plans, current goals and expectations

relating to its future financial condition, performance and results. These statements contain the words “anticipate”, “believe”, “intend”,

“estimate”, “expect” and words of similar meaning. All statements other than statements of historical facts included in this presentation,

including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management

for future operations (including development plans and objectives relating to the Company’s products and services) are forward-

looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that

could cause the actual results, performance or achievements of the Company to be materially different from future results,

performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based

on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the

Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company

expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained

herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances

on which any such statement is based. The past business and financial performance of SABMiller plc is not to be relied on as an

indication of its future performance.

All references to “EBITA” in this presentation refer to earnings before interest, tax, amortisation of intangible assets (excluding

software) and exceptional items. EBITA also includes the group’s share of associates’ and joint ventures’ EBITA on the same basis.

All references to “organic” mean as adjusted to exclude the impact of acquisitions and disposals, while all references to “constant

currency” mean as adjusted to exclude the impact of movements in foreign currency exchange rates in the translation of our results.

References to “underlying” mean in organic, constant currency.

17National Breweries Plc

© SABMiller 2014

Agenda

1. Welcome

2. Trading and business environment

3. Strategic review

4. Managing sustainable development

5. Financial highlights

6. CAPEX

7. Prospects

18National Breweries Plc.

© SABMiller 2014

Trading and business environment

Good local currency results despite a tough economic climate and challenging trading conditions. The

business has experienced a real turn around particularly in the 2nd quarter.

Design and commissioning problems at the new Lusaka brewery resulted in supply challenges in the

first few months of the period. These technical issues have been resolved.

Technical focus from the integrated structure meant that production reliability and quality improved

across all 5 plants in the first half.

The Sales and Distribution team have placed significant focus on our route to market strategy and have

ensured that we are supplying consistently to more customers over a greater geographic foot print than

last year.

With real focus and the right pricing, Super volumes have grown by 75% over prior year, improving our

margin mix. Carton volumes back to growth over prior year in Q2. We took market share in the second

quarter.

While efficiencies have been realized through cost control, our profitability and margins are significantly

under pressure as a result of the foreign exchange currency impact on the cost of importing raw

materials associated with packaging.

Zambian Breweries Plc 19

© SABMiller 2014

Strategic review Real business focus on five key pillars in the period to deliver the growth

Competitiveness

Business turnaround

Developing a sales lead organisation

Fostering a performance culture

Improving our corporate reputation

Cost leadership

Focussed on Chibuku Super PET growth and rethink of the Returnable Bottle category, while returning

our core Carton business to growth.

The playing field for the opaque beer business remains unleveled as some competitor breweries

continued to trade in bulk beer due to the non enforcement of SI No. 72 of 2012. (The liquor license

regulation quantities and packaging 2012) .

Availability of cheap spirits has increased significantly and some consumers are drifting into this

segment at great health and social risk.

National Breweries Plc. 20

© SABMiller 2014 21

Five worlds, five shared imperatives

a thriving world a sociable world a resilient world a clean world a productive world

Zambian Breweries Plc.

Itawa Water Springs Manja Pamodzi

project

Mama Mpapa project Barley and the

Maltings

Responsible

retailers

Financial Highlights

© SABMiller 2014

Financial highlights – against prior year – local currency

Chibuku Carton volume decline -5%

Chibuku Super volume growth +75%

Net producers revenue growth of +8%

Gross profit decline -2% driven by an increase in carton purchase prices

Depreciation now a major cost following Lusaka investment

Operating profit growth +11%


© SABMiller 2014

Good hedging strategy in place has helped minimise the transactional exchange

impact

Operating profit margin growth of +40bp

Profit after tax growth of +11% (-13% in US$)

The board approved a 75% interim dividend.


Financial highlights – against prior year – local currency

© SABMiller 2014



ZMW'000 USD '000


Reported

Net revenue (NPR) 241,261 223,964 7.7% 30,354 35,810 -15.2%

Operating profit 34,188 30,819 10.9% 4,301 4,928 -12.7%

Operating profit % NPR 14.2% 13.8% 40bp 14.2% 13.8% 40bp

Sales volumes (Hl'000)

Total 1,182 1,121 5.5% 1,182 1,121 5.5%

Chibuku Carton 929 976 -4.9% 929 976 -4.9%

Chibuku Super 253 145 75.2% 253 145 75.2%

© SABMiller 2014



ZMW'000 USD '000


NPR 241,261 223,964 7.7% 30,354 35,810 -15.2%

Gross profit 83,369 84,803 -1.7% 10,489 13,559 -22.6%

Gross margin (%NPR) 34.6% 37.9% (330bp) 34.6% 37.9% (330bp)

Net operating expenses (40,497) (55,011) 26.4% (5,095) (8,796) 42.1%

Exchange gains/(Losses) 8,684 (1,026) 846% 1,093 (164) 665.9%

Operating profit 34,188 30,819 10.9% 4,301 4,928 -12.7%

Finance income/(costs) 402 533 24.7% 51 85 40.7%

Profit before tax 34,589 31,352 10.3% 4,352 5,013 -13.2%

Income tax expense (12,463) (11,435) -9.0% (1,568) (1,828) 14.2%

Profit for the year 22,126 19,917 11.1% 2,784 3,184 -12.6%

© SABMiller 2014

Key financial ratios (US$ where applicable)


Per Hl Analysis F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 HY1

NPR/Hl 27.38 27.59 28.56 28.72 28.14 32.88 29.15 23.72

Gross profit/Hl 12.97 13.13 11.27 11.17 8.91 11.41 11.45 8.87

Fixed costs/Hl* 6.21 6.42 6.51 7.93 6.03 7.03 7.62 5.88

Operating profit/Hl 5.56 6.12 6.32 6.36 4.39 6.10 3.16 3.64

Ratios

Operating profit margin 20.3% 22.2% 22.1% 22.1% 15.6% 18.6% 10.8% 15.3%

Gross profit Margin 47.4% 47.6% 39.5% 38.9% 31.7% 34.7% 39.3% 37.4%

Interest cover ratio (times) 49.3 53.6 65.8 113.6 109.8 372.7 238.1 335.6

Effective tax rate 36.5% 37.9% 35.6% 35.6% 38.0% 36.9% 36.8% 36.0%

Return on assets 56.4% 40.7% 44.8% 46.6% 25.1% 22.9% 10.7% 9.4%

Return on equity 169.9% 111.4% 120.1% 126.2% 56.4% 48.7% 24.3% 18.9%

Return on Capital employed 90.7% 66.8% 69.4% 72.9% 40.6% 36.0% 16.7% 13.5%

Fixed Assets turnover ratio 8.4 6.9 7.2 5.9 4.7 3.5 2.1 1.4

Earning per share 0.09 0.10 0.12 0.11 0.10 0.13 0.07 0.04

Balance sheet ratios

Current ratio 0.79 1.02 1.03 0.80 0.95 0.99 0.54 0.64

Debt ratio 67% 63% 63% 63% 56% 53% 56% 58%

Debt - Equity ratio 2.0 1.7 1.7 1.7 1.2 1.1 1.3 1.2

Capitalisation ratio 19% 17% 17% 18% 16% 14% 11% 12%

*Fixed costs as per internal reporting

© SABMiller 2014

CAPEX


3,872 5,215 7,234 10,888 18,956

33,840

54,193

69,391

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

F'09 F'10 F'11 F'12 F'13 F'14 F'15 F'16 Fcst

Cumulative Capex Spend (US$'000)

Capex (US$'000)

© SABMiller 2014

Prospects Significantly weakening economic fundamentals. Expect our consumer’s disposable income to

become increasingly constrained as a result of inflationary price increases of key commodities and

utilities. Consumers will down trade into illegal bulk and illicit spirits.

Power and water restrictions will remain a major concern and will add significant cost in the second

half.

Expect a bigger impact from currency in the second half.

We will take advantage of the shelf life on Super to enhance our sales to more remote areas.

We will continue to engage on the non enforcement of bulk Opaque trading

The business has gained real momentum in Q2 which we will continue to drive in the second half.


Zambrew and Natbrew HY 2016 financial results presentation

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Transcript of Zambrew and Natbrew HY 2016 financial results presentation