zambrew and natbrew brief to institutional shareholders - december 2013

Investor Conference Call

Half year results Six months ended 30 September 2013

05 December 2013

1

December 2013 © SABMiller plc 2012

HOLDING STATEMENT

2

“Statements in this presentation (including all other media) that are not

historical facts or information may be forward-looking statements.

These forward-looking statements are based on information available at

the time the statements are made and/or management's belief as of that

time with respect to future events and involve risks and uncertainties that

could cause actual results and outcomes to be materially different.

Important factors that could cause such differences include, but are not

limited to the loss of key customers, the disruption to operations,

economic conditions, political conditions and reduction in demand.

While we may elect to update forward-looking statements at some point

in the future, we specifically disclaim any obligation to do so, and

therefore, you should not rely on these forward-looking statements as

representing our views as of any date subsequent to today.”


ZAMBIA COUNTRY OVERVIEW

3

• Real GDP growth forecast at 7.4%

2013 - 17

• Inflation expected to remain in

single digits 2013 – 17

• Despite a 21% increase in fuel

prices, sizeable wage increases in

the public sector and the removal

of subsidies on maize

• Moderate Kwacha depreciation

expected per annum to 2017

Source – EIU Country report September


Attractive economic fundamentals

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5% Zambia

Africa

LATAM

World

0%

1%

2%

3%

4%

5%

6%

7%

8%

Zambia

Africa

LATAM

World

Real population growth rates of 3.3%

Population growth 2012 Robust GDP growth

2012 percentage growth

Total population : 14.08m

Rural /Urban : 60/40

Gender split (M/F) : 49/51

2012 GDP : US$20.38b

4


And set to continue looking good

2012 2013 2014 2015 2016

Real GDP growth % 6.9 7.0 6.8 7.5 7.5

Real private consumption

growth

8.1 7.0 4.7 5.4 5.9

GDP per capita (US$) 1,650 1,750 1,850 1,970 2,100

CPI % 6.6 7.0 7.2 6.6 6.4

US$ Exchange rate 5.15 5.39 5.51 5.54 5.60

Population (million) 14.1 14.5 14.9 15.3 15.8

Population growth % 3.3 2.9 2.9 2.8 2.8

5

Source – EIU


Good prospects for growth of the business

6

Country 2013 GDP

growth%

2013 GDP

p/cap

Expected

Mozambique 6.5 1,100

Zambia 7.0 1,750

Tanzania 7.6 1,620

Kenya 5.1 1,810

Botswana 4.1 16,550

Zambian Breweries plc.


05 December 2013

7


Trading and Business Environment

Economic fundamentals remained strong but were more challenging

Negative impact on consumer spending from the removal of subsidies

Inflation ended above government target of 6%

Central bank interest rate increased from 9.25% to 9.75%

Encouraging reduction in the level of new legislation.

– SI 55 did add a significant administrative burden

Exchange rate depreciated against the US$ but appreciated against

the Rand

10% excise rate awarded for Cassava beer in July 2013

8


Trading and Business Environment – Exchange Rates

9

ZMK/ZAR

ZMK/USD

Good positive price

variance on imports

Loss on forward

contracts


Operating Highlights

Beer growth of 13%

Mosi Lager growing by 29%, Castle by 7%, Castle Lite by 13%

Soft drinks growth of 22% - focused execution and affordability

Fanta performing particularly well

Bedding down of our Sales and Operating Planning processes

HR focus on training and development

Launch of Project Griffin – centralised Treasury function

10


Financial Highlights – Income statement

Good performance with strong growth over prior year

Net producers revenue growth of 10%

Cost savings on Ndola production and preform savings

Delay in depot roll out helped manage distribution costs

Strong variables and fixed cost controls in the business

Growth in depreciation – Ndola Plant

Operating profit growth of 30%

Operating profit margin growth of 310 bps

14% reduction in interest burden

Dividend decision delayed to year end

11


US$’ 000 Sept 14 Sept 13 Change %

Reported

Net producers revenue 117,367 106,391 10%

EBITA 24,203 18,627 30%

EBITA margin (% of NPR) 20.6 17.5 310 bps

Sales volumes (hl’000)

Total 1,053 905 16

Lager 656 580 13

Soft drinks 396 325 22

12

Financial results – F14



Net producers revenue 117,367 106,391 10

Gross Profit 60,872 50,884 20

Gross margin (% NPR) 51.9 47.8 410 Bps

Net operating expenses (35,073) (30,160) (16)

Exchange losses (1,596) (2,096) 24

Operating Profit 24,203 18,627 30

Finance Costs (4,463) (5,176) 14

Profit before taxation 19,740 13,451 47

Income tax expense (7,295) (5,111) (43)

Profit for the year 12,445 8,340 49

13

Income Statement


Financial Highlights – Balance Sheet

Robust balance sheet

CAPEX projects include Ndola, Fleet, Coolers and Containers

Good cash flow generation

Focus on working capital management

– Malt and Barley stocks

– Intercompany Debt at quarter end with Tanzania

Delayed payments at quarter end as a result of SI55

US$45m debt on syndication loan

14


US$’ 000 Sept 14 Sept 13

Goodwill and Intangible assets 14,765 14,158

Property, plant and equipment 209,822 209,314

Current assets excluding cash 69,427 54,021

Cash and cash equivalents 14,406 (12,258)

Borrowings (44,984) (56,915)

Other current and non-current liabilities (106,785) (74,663)

Net Assets and Total Equity 156,651 134,017

15

Balance sheet

December 2013 © SABMiller plc 2013 16

VAT and Excise Contribution

A – Excise in March „09 reduced from 75% to 60%

B – Excise rate reduced in April „10 from 60% to 40%

C – Excise on soft drinks removed from 01 January 2013

$13 $14

$25 $27 $28

$17

$47 $46

$45 $50

$58

$29

1,118 1,250 1,472

1,623

1,922

-

10

20

30

40

50

60

70

80

90

September

F09 F10 F11 F12 F13 F'14

Split of Total Taxes for Sparkling Soft Drinks and Lager | in US$'m

VAT Excise Volumes

C B A


Financial outlook – Excise

17

Consistency and predictability of government policy remains critical

as an enabler to us taking long term investment decisions

Higher pricing for government borrowing

– ambitious infrastructure plans

– soft copper market conditions

– negative turn in business climate

Government looking to raise additional funding

11 October - MOF announced a 50% increase in clear beer excise

Presentation to the Ministry of Commerce, Trade and Industry

Historical excise and volume trends

18

610 608

530 545 570 554 562 537 534 561 577

604

706

906

1,058

1,188 100%

85%

70% 75%

60%

40%

0%

20%

40%

60%

80%

100%

120%

0

200

400

600

800

1,000

1,200

1,400

F98 F99 F00 F01 F02 F03 F04 F05 F06 F07 F08 F09 F10 F11 F12 F13

Historical excise rates and lager volumes | in Hl'000

Volumes Excise rates


0.20

0.25

0.27

0.16 0.15

0.25 0.24

Botswana750ml

Mozambique550ml

Tanzania500ml

Namibia750ml

South Africa750ml

Zambia 375ml Zimbabwe375ml

Price per 100ml (US$)

19

Zambian Beer is still relatively expensive in the

region


Financial outlook

20

Downgrading in credit rating from Fitch and Standards & Poors

– exchange rate depreciation

Beer price increase of 11.1% in October 2013

– a real price decrease of 4.2% over the last 4 years

Continued strong volume and revenue growth

750ml Mosi bulk pack launch in the North

Appeltiser launch


Financial outlook for F14

21

Eagle Growth

Castle Lite pricing reduced to manage PSL and smuggling risk

Solwezi and Kasama depots on line

Recycling agenda progressing

Cassava progress

Maltings bids in


Proposed Investments - Maltings

Total investment – K172.8m (US$32.6m)

22

National Breweries plc.


05 December 2013

23


Trading and Business Environment

Economic fundamentals remained strong but were more challenging

Aggressive maize purchasing plan yielding a saving on our Maize crop

SI on Liquor Licensing amended in the first quarter

– wider distribution of Chibuku Super

Bulk providers remained in the market despite legislation

Lack of coin change prompted us to take a 7% increase in the carton

pricing in August – a total price up of 16.6% for the year

24


Operating Highlights

Beer volume decline of 5% against prior year

– water shortages and power outages in Kitwe

– tougher economic conditions

Increased mix of Chibuku Super to 14%

Delay in PET ramp up in Kitwe and Lusaka

Improved quality

HR focus on training and development

Works started on $26m new Lusaka brewery and PET line

25


Financial Highlights – Income statement

Net producers revenue growth of 10% driven by the net impact of

– a 5% reduction in volumes and

– the 16.6% price increase on Chibuku Cartons

– improved mix towards Chibuku Super

Gross margin decline of 100bps due to;

– increased maize and carton pricing

– increased distribution of SUPER to Lusaka

Slight improvement in operating profit of 2% driven by the improved

portfolio mix and tight fixed cost controls

EBITA margin decline driven by the delay in Chibuku Super ramp up

Dividend decision delayed to year end

26



Reported


EBITA 4,658 4,547 2

EBITA margin (% NPR) 13.1 14.0 (90) Bps

Sales volumes (hl’000)

Traditional beer 1,100 1,163 (5)

27

Financial results – F14




Gross Profit 13,484 12,663 6

Gross margin (% of NPR) 37.8 38.9 (110) Bps

Net operating expenses (8,484) (7,447) (14)

Exchange losses (342) (669) 49

Operating Profit 4,658 4,547 2

Finance income 188 52

Profit before taxation 4,846 4,599 5

Income tax expense (1,808) (1,704) (6)

Profit for the year 3,038 2,895 5

28

Income statement


Financial Highlights – Balance Sheet

Robust balance sheet

CAPEX projects include fleet investment and the new Lusaka Plant

Good cash flow generation

Full stock holding of maize with requirements for first quarter of next

year

Delayed payments at quarter end as a result of SI55

29


US$’ 000 Sept 14 Sept 13

Property, plant and equipment 14,959 11,043

Current assets excluding cash 11,669 8,343

Cash and cash equivalents 5,943 4,499

Other current and non-current liabilities (18,231) (15,649)

Net Assets and Total Equity 14,340 8,237

30

Balance sheet

December 2013 © SABMiller plc 2013 31

VAT and Excise Contribution

$8.4 $7.4

$8.0 $7.9 $8.5

$5.1

$6.1

$5.3

$5.9 $5.2

$6.6

$3.0

1,715

1,711

1,895

1,736

2,323

3

5

7

9

11

13

15

17

September

F09 F10 F11 F12 F13 F'14

Split of Total Taxes for Opaque Beer | in US$'m (for NB)

VAT Excise Lager Volumes


Financial outlook

32

Chibuku Kitwe Super PET line fully commissioned

– Lusaka Pilot plant upgraded

Improved mix towards SUPER

Chibuku Lusaka rebuild and new SUPER line in process

Launch of new Returnable Bottle in the North

Recycling agenda progressing

Sustainable Development Zambia

33


Sustainable Development

Partnered with the Graca Machel Trust

– campaign against child marriages

Partnered with the Ministry of Health

– donated Insecticide Treated Mosquito Nets to Nyimba District

5-day workshop - to train 100 youths in:

– basic business skills

– dangers of under-age drinking and abusing alcohol

Itawa Springs Protection Project has now been running for a couple of years in collaboration with GIZ

– US$120,000 to undertake engineering, ecological and other protective and restoration works

– Community outreach programme

34

Thank you.

Q&A.

35

zambrew and natbrew brief to institutional shareholders - december 2013

Investor Relations

half year

quarter end

net assets

exchange losses

total taxes

current liabilities

excise

current