Changing face of SABMiller’s board

Sab beer on a conveyer belt at Alrode brewery in JHB. (771) Photo: Leon Nicholas

Sab beer on a conveyer belt at Alrode brewery in JHB. (771) Photo: Leon Nicholas

Published Jul 3, 2013


Ann Crotty

When Cyril Ramaphosa resigns at this year’s annual general meeting later this month, SAB/SABMiller will, for the first time in its 118-year history, not have any South African non-executive directors on its board.

The only non-executive director from Africa will be international economist Dambisa Moyo, who was appointed in 2009.

However, South Africa will continue to dominate the ranks of executives at SABMiller. In addition to Alan Clark, who was appointed chief executive in April, the group’s 10-person executive committee includes five South Africans: Norman Adami, Mark Bowman, Tony van Kralingen, Karl Lippert and Ari Mervis.

Analysts who track SABMiller contend that Clark’s replacement in several years’ time is likely to come from the South African ranks, with Bowman and Mervis hot favourites.

The appointment of the first non-South African chairman – to replace Meyer Kahn – has resulted in a more than doubling of the non-executive chairman’s fee to £650 000 (R9.7 million) from £315 000.

A note in the remuneration report offers the following explanation: “This appears as a significant percentage increase because the previous non-executive chairman was based in South Africa and received a lower fee based on the market rate for that location.”

While South Africa’s dominance in the group’s turnover and profit has been challenged by SABMiller’s extremely successful operations in Latin America, the latest annual report reveals that South Africa remains the single largest contributor to group revenue, accounting for $4.9 billion (R49bn) of total turnover of $23.2bn in financial 2013.

The relative weakness of the rand against the dollar at the reporting stage may have understated the full strength of South Africa’s position.

Colombia was the second most important country in terms of turnover, contributing $3.7bn. The recent acquisition of Foster’s has pushed Australia into a close third position, with a turnover contribution of $3.1bn.

While the report does not provide profit details on a country-by-country basis, it highlights the importance of SABMiller’s exposure to emerging markets. The Ebita (earnings before interest, tax and amortisation) margin on turnover in Latin America is an impressive 27 percent; in South Africa the margin is 21 percent; and in the rest of Africa it is 22 percent.

These strong performances compare with European margins of 13.6 percent, North American margins of 14.4 percent and Asia Pacific margins of 15 percent.

The Asia Pacific margins were beefed up by the inclusion of Foster’s. Ahead of that transaction, the predominantly China- and India-based business was generating margins of only 9 percent.

The substantial margins generated in its emerging markets have played a major role in SABMiller’s share price performance.

The annual report’s 20-page detailed and dense remuneration report makes frequent reference to the fact that over five years to March, £100 invested in SABMiller would have returned £354, while the same amount invested in the “FTSE 100 total return index” would have returned just £136.

These high returns were used to justify paying former chief executive Graham Mackay £9.7m for financial 2013, making him the third-highest paid executive on the London Stock Exchange.

SABMiller shares lost 1.28 percent to close at R476 on the JSE yesterday.

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