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SouthAfricanBrewerie (SAB)

  Print      Mail a friend       Annual reports

Thursday 30 May, 2002


Final Results - Part 1

South African Breweries PLC
30 May 2002


                          SOUTH AFRICAN BREWERIES plc

                            PRELIMINARY ANNOUNCEMENT


 London and Johannesburg, 30 May 2002. South African Breweries plc - one of the
 world's leading brewers, with interests in Africa, Central and Eastern Europe,
 Central America and Asia - today announces its preliminary (unaudited) results
                 for the year to 31 March 2002. Highlights are:

                                                               2002        2001*        % change
                                                               US$m         US$m         US$          £

Turnover                                                      4,364        4,184          4           7

Trading profit (PBIT)                                           704          700          1           4

EBITA                                                           766          720          6          10

Profit before tax                                               606          646         (6)         (3)

Adjusted PBT                                                    668          666          -           3

Adjusted earnings                                               350          372         (6)         (3)

Adjusted earnings per share

- US cents                                                     48.7         53.3         (9)         (6)

- SA cents (up 21%)                                           472.5        390.9

Dividends per share (US cents)                                 25.0         25.0

Note:      The exceptional items of US$8 million net (2001:nil) comprised:

            - Pitesti (Romania) brewery closure costs US$9 million;

            - Ursus (Romania) asset impairment US$10 million; offset by

            - Velke Popovice (Czech) asset impairment reversal US$11 million

           EBITA, adjusted PBT and adjusted earnings exclude exceptional items 
           and goodwill amortisation. Percentages expressed in terms of 
           £ sterling movements are given in order to aid comparability with 
           other FTSE companies.

* Restated for deferred tax change in accounting policy.


•         Total beverage volume growth of 15.5% (organic 4.8%) to 99.4 million

•         Total lager beer volumes increase 13.2% (organic 3.5%) to 70.4 million

•         SABI Europe lager beer volumes up 5.9% (organic 4.6%) and EBITA up

•         Beer South Africa volumes improve 1.4% with a margin increase of 60
          basis points to 25.8%

•         Acquisitions in Central America, India and China have enhanced our
          position internationally

•         Acquisition of Miller Brewing Company in the United States announced

Meyer Kahn, Chairman of SAB plc, states: 'Once again SAB's underlying operations
around the world, despite a global economic slowdown, have delivered an
impressive performance. However, the material adverse currency moves in sub
Saharan Africa affected a sizeable portion of our business and have led to an
adjusted earnings decline of 6% in US dollars (adjusted earnings per share
decline of 9%).

In pursuing our growth strategy globally we have moved into new territory with
our acquisitions in Central America and made a number of important investments
in China, Africa and Central Europe. These enhance our positions in these
territories and further diversify the group's international operations and
currency exposure.

In line with our strategy to participate actively in the consolidation of the
global beer industry, where we can create value for our shareholders, we have
announced today the acquisition of Miller Brewing Company in the United States.'

  This announcement, a copy of the slide presentation and video interviews 
                 with management are available on the
                SAB plc website at 
      Video interviews can also be found at

       Incorporated in England and Wales (Registration Number 3528416)

CHIEF EXECUTIVE'S REVIEW                                                                                           2

Business review

Group operating performance

I am pleased to report another year of good growth in beverage volumes and
strong operational performance in our businesses around the world. Total
beverage sales volumes grew 15.5% (organic growth 4.8%) to just under 100
million hectolitres.

Once again management has concentrated on brand positioning and portfolio
enhancement, overhead productivity and procurement. Benefit from this attention
is evident and, as a result, operational performance across the group was

Lager volumes grew 13.2% and importantly, organic volume growth of 3.5% was
achieved. The muted growth of 1.4% in our largest single market, South Africa,
had a dampening effect but it is nevertheless gratifying that last year's volume
decline there has started to reverse.

Other beverages are becoming an increasingly important segment of our business.
Acquisitions and investments contributed to the volume growth of 27.2% (organic
9.0%) in carbonated soft drinks (CSD's). Traditional sorghum beer in Africa grew
by 4.4%.

Turning to financial performance, sales volume growth contributed to a turnover
increase, including share of associates, of 4.3% to US$4.4 billion. EBITA grew
6.4% to US$766 million, and continued focus on productivity and cost containment
helped deliver margin improvement across many of our businesses, particularly in
the larger subsidiaries. EBITDA was similarly strong, up 5.9% to US$904 million.

Reported results were, however, impacted by the extraordinary 24.4% decline in
the exchange rate of the SA rand, the functional currency of our largest
subsidiary, against the US dollar, as well as relative weakening in other
African currencies. Adjusted earnings were 5.9% down for the year at US$350
million. With a weighted average increase in shares in issue of 3.1% during the
year, adjusted earnings per share decreased by 8.6% to US48.7 cents.
Notwithstanding this decline, strong cash flows enable us to maintain the final
dividend at last year's level.

The year has been characterised by expansion and acquisition activities in a
number of countries including the opening up of a new region to SAB - Central
America.  Our acquisitions in Honduras and El Salvador have created a leading
brewing and soft drinks business within these two countries.  We intend to
exploit the synergies that exist between beer and CSD's in these markets, and
leverage the experiences gained in Africa with combined beer and CSD businesses.

Elsewhere, we acquired a majority interest in Bere Timisoreana in Romania; we
were active in Africa, with CSD acquisitions in Angola and Zambia and increased
lager beer investments in Uganda and Mozambique. In China we further
strengthened our regional positions with an aggressive acquisition program, and
we made two further investments in India.

Notwithstanding weakening economies and rising unemployment levels, especially
in Poland, our European businesses grew sales volumes by 6.0% (organic growth
4.8%) to just over 22.5 million hectolitres, with contribution to this growth
coming from virtually all operations. EBITA growth was impressive at 34.4% to
just under US$200 million with an excellent result coming from Poland (the
largest contributor), the Czech Republic, where restructuring synergies and
benefits continue ahead of expectations, and Russia which is now earnings

Our African and Asian businesses increased sales volumes by 26.0%, though much
of this was acquisition driven, mainly in China. Organic growth was nevertheless
good with lager growing 4.9% and other beverages 12.2%. EBITA growth for the
region of 29.5% has been assisted by the first time inclusion of our associate

Socio-political problems, currency weaknesses and certain competitive pressures
in Africa hampered underlying EBITA growth. Acquisition activity in China,
strategically necessary and well-founded, was distracting and time consuming for
local management in the first year of incorporation.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               3

Individual results in Africa were once again mixed. Our brewery in Kenya was
impacted by competitive pressure but, as recently announced, we have
restructured our investments in the region in conjunction with East Africa
Breweries Limited and profitability should improve considerably in the future.
While the result on earnings of our strategic alliance with Castel was
essentially neutral in this first year, we increasingly see benefits from our
association with them as synergies in the areas of purchasing, operational
management and new investment become realisable. Castel's total volumes grew
7.4% over the prior period with especially strong gains in the CSD sector.

In Central America, EBITA of US$22 million for the four months since acquisition
was behind expectations, due mainly to the combination of adverse economic
conditions post Hurricane Michele and increased competition in the CSD sector.
Though still early days for SAB's operational management, strong brand
portfolios in the respective lager and CSD businesses, evident opportunities to
capture the synergies and a skilled workforce give us undiminished enthusiasm
for the potential of these businesses.

In South Africa, the performance of our beer operations has once again been
creditable. The volume decline in the prior year has been arrested and growth of
1.4% achieved. Local management's relentless focus on efficiency and
productivity has delivered EBITA growth of 10.5% in local currency and a 60
basis point increase in margin despite substantial raw material price increases.
ABI delivered well to expectations, with real productivity gains, margin
increases and strong trading profit improvement of 20% in local currency off
positive volume growth; all despite considerable increases in input costs.
Equally impressive was a turnaround in the performance of our hotel and gaming
businesses during the second half year, to deliver a substantial 53.1%
improvement in rand trading profit for the year.  Strategic alternatives for the
future of this business are still being evaluated.


There are a number of positive signs for the upcoming financial year. Europe's
forward momentum, while moderating, should continue and better results are
expected from both Africa and China. There are more positive signs within our
operations in South Africa and the rand is showing some resilience. Finally, I
have every reason to believe that Central America will deliver on its potential.

Naturally the results of the group will be materially affected by the inclusion
of Miller Brewing Company, whose acquisition will bring both excitement and
hugely increased opportunities to our business. More than ever we are well
positioned to play a leading role in the world beer industry as change and
consolidation accelerate.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               4

SABI - Europe

                                                                    2002          2001       % change
Financial summary                                                   US$m          US$m            US$

Turnover                                                           1,280         1,097             17
Trading profit *                                                     168           130             29
EBITA **                                                             198           148             34
Operating margin (%) *                                              13.1          11.9
EBITA margin (%) **                                                 15.5          13.5

Sales volume (hl 000's)
- Lager                                                           22,359        21,120              6
- Lager comparable                                                22,099        21,120              5
- Other beverages                                                    178           146             22

* Before exceptional items

** Earnings before interest, taxation and goodwill amortisation, and before
exceptional items.

SABI Europe's businesses continued their strong operational performance again
this year, up a pleasing 34.4% in EBITA, on volume growth of 6.0%. In
particular, focus on rationalisation, costs and cash management enabled the
division to expand its EBITA margin by 200 basis points and generate substantial
free cash flow. Productivity and procurement initiatives reaped significant
rewards, and brand portfolio and packaging extensions boosted market shares and


Volume growth in the Polish beer market came to a halt in the current year,
following several years of strong advances. This was caused by a downturn in the
local economy and the previous government's imposing large excise increases.
(There are now signs that these may be moderated in future). SAB's Kompania
Piwowarska performed very well in this market with 6.0% volume growth, reaching
31% market share for the year from 29.7% in the prior year. Our value share is
greatly in excess of our market share. KP's flagship brand, Tyskie Gronie, sold
over five million hectolitres and is now one of Europe's top ten beer brands by
volume. Tyskie Gronie was judged overall champion beer for bottled and canned
lagers at the prestigious Brewing Industry Awards 2002 which took place at
Burton-upon-Trent in the UK. Redds' success also continues, reaching 50% of the
flavoured alcoholic beverages market inside 18 months.

Czech Republic and Slovakia

The Pilsner Urquell group enjoyed an excellent year. Volumes, market share and
net real revenue all showed strong improvements. Beer industry volumes continued
to decrease, as anticipated, by 1% but the Pilsner Urquell group achieved growth
of 3.2%. Particularly pleasing was a 20% increase in volumes of our premium
brand Pilsner Urquell. This assisted margin development, as did improvements in
brewing raw material procurement, production yields and overall productivity.
The effective national integration of our three businesses has yielded synergies
well ahead of initial expectations.

Slovakia is benefiting from management and marketing integration with the Czech
business and is improving in profitability.

Pilsner Urquell International

The highly successful re-launch of Pilsner Urquell into its key international
markets, in 2001, resulted in a second successive year of 30% growth in brand
volumes outside Czech. In the United States sales reached 1.4 million cases
(112,000 hectolitres), representing 54% growth in volume, and Pilsner Urquell
was named one of the 'hot brands' of 2001 by Impact magazine, the leading US
beverage trade publication.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               5

There was continued growth in sales in Germany, up by 25% in the year, against a
background of a shrinking market. In Poland, Pilsner Urquell is now the number
one import brand and sales continue to grow. In other markets, new distributors
were appointed to take advantage of import growth opportunities, whilst in the
UK distribution and visibility have improved.


Volume growth slowed in Russia in the second half, to end the full year 27.2%
ahead of prior. While SAB's own brand Zolotaya Bochka conceded some market share
points, our premium licensed brands, Miller Genuine Draft and Holsten, showed
stunning growth - both trebling in volume. The result of this favourable mix in
brand sales was a significant improvement in margins and the business produced
good operating cash flow.

We have decided to expand further the capacity of the Kaluga brewery from 2.3
million hectolitres to 3.5 million hectolitres at a cost of some US$60 million.
This will enhance our competitive capability for additional brands and packs in
this growing market.

Other operations

In Hungary the market contracted some 2%, but our Dreher subsidiary reflected a
small but satisfying market share recovery. This, coupled with the industry's
real price increases, saw good margin expansion which assisted operating profits
to more than double, albeit off a modest base.

During the year, we announced the acquisition of an 83.7% interest in Bere
Timisoreana, giving our Romanian business critical mass and a market share of
around 14%. This aided a rationalisation of our facilities including the closure
of Pitesti brewery and write down of other assets, the cost of which was US$19
million. The impact of this has been partly offset by release of surplus
provisions relating to one of the Czech breweries of US$11 million. Industry
volumes in Romania declined 8% in the last 12 months, however our operations are
now much better positioned to maintain their positive operating cash flow.

The Canary Islands' operations have produced encouraging gains in market share,
despite the first full year of production by a new domestic competitor.

SABI - Africa and Asia

                                                                    2002          2001       % change
Financial summary                                                   US$m          US$m            US$

Turnover                                                             946           700             35
Trading profit                                                       162           130             25
EBITA                                                                171           132             30
Operating margin (%)                                                17.2          18.5
EBITA margin (%)                                                    18.1          18.9

Sales volume (hl 000's) *
- Lager                                                           23,141        17,116             35
- Lager comparable                                                17,953        17,116              5
- Carbonated soft drinks (CSD's)                                   3,648         2,685             36
- Traditional sorghum                                              7,625         7,301              4
- Other beverages                                                  2,579         2,260             14

* Castel volumes of 9,633,000 hectolitres lager, 7,489,000 hectolitres CSD's and
569,000 hectolitres other beverages are not included

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               6


African beverage volumes grew organically by 8.8% to end above 18 million
hectolitres, aided by excellent performances from the Coca-Cola bottling
business in Luanda, Angola, market share gains in the competitive Ghanaian
market and advances by our traditional sorghum beer businesses in Zambia, Malawi
and Tanzania. Lager beer volumes grew organically 4.1%. In Zimbabwe our
associate, Delta Corporation, grew their beer and soft drinks volumes by 22.4%
despite the difficult environment. However, in Uganda, an increase in excise,
passed on to the consumer, resulted in a drop in volumes.

Good EBITA growth was recorded by Zambia, Ghana and Malawi. In Tanzania,
Botswana and Mozambique, however, little or no dollar growth was shown. The full
impact of good operational performances in tough conditions in many of the
countries was not translated into reported US dollar results due to weak

A number of value-adding acquisitions were made during the year. These included
45% of the Coca-Cola bottler in Luanda, Angola; 60% of the Coca-Cola bottler in
Southern Angola; a further 54.6% of Nile Breweries in Uganda; 13.5% of Cervejas
de Mozambique and 90% of the Coca-Cola bottler in Zambia. The last mentioned
allows for consolidation benefits from integrating this into the Zambian beer
business, a formula already successfully implemented in Botswana, Swaziland and

Subsequent to the year end, two important consolidation transactions were
concluded. A landmark deal was signed on 15 May 2002 between SAB and East
African Breweries Limited (EABL), the two major brewers in East Africa. This
sees Castle Brewing Kenya Ltd being sold by SAB to EABL in return for a 20%
stake in their Kenya Breweries Limited subsidiary. Tanzania Breweries Limited
(TBL), will acquire its EABL-owned competitor in exchange for 20% in Tanzania
Breweries to be funded through a share issue with the additional volumes more
than compensating for the dilution effect on SAB's shareholding in TBL. Each of
these transactions will deliver enhanced earnings. In Mozambique, we acquired
Laurentina Cervejas SARL and its well known Laurentina brand.

Many of our currencies in the sub region were unfortunately impacted by adverse
political considerations and the strong US dollar.  Worse affected amongst these
were the Mozambican metical (24.7%), the Zimbabwean dollar (75.8%), the Botswana
pula (13.7%) and the rand-linked currencies of Lesotho and Swaziland (24.4%). As
a result, it was difficult to convert volume and turnover gains into increased
US dollar earnings. However, this effect was countered somewhat by productivity
gains and savings contributed by Sabex, our Johannesburg-based purchasing and
logistics division.

First time results from our 20% shareholding in the Castel group met
expectations. Beer and soft drinks volumes grew by 7.4% over prior year while
the CFA franc, Castel's main operating currency, is pegged against the euro,
thereby stabilising US dollar earnings.


China Resources Breweries, SAB's Chinese joint venture company, concluded a
successful year in terms of strategic acquisitions. Market leadership in our
existing stronghold in the North East of the country was achieved by purchasing
five strategically located breweries in the region.  CRB also became the leading
brewer in Sichuan province, the country's most populous and one of the fastest
growing beer markets, by entering a majority-owned joint venture with the Blue
Sword group (10 breweries, 9 million hectolitre capacity). Total capacity now
stands at 30 million hectolitres and CRB is firmly positioned as the country's
number two brewer.

Our Chinese business has now consolidated its management structure and
geographic presence into three regions: North East, Central and West, with a
corporate head office established in Beijing.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               7

Second half profitability in China was unfavourably impacted by the above
acquisitions which were effective just before or during the winter period when
sales dip sharply, resulting in negative contribution from these businesses, and
management's attention was also concentrated on the task of restructuring.
However, management believes the operations are well positioned to deliver
profitable growth, and improvement was already evident from these acquisitions
towards year end.

The year also saw expansion by our Indian subsidiary with the acquisition of
Mysore Breweries Limited and Rochees Brewery (subject to FIPB approval), thereby
gaining a foothold in four of the five largest beer-consuming states in the
country.  Castle Lager was successfully launched as a premium brand in the
cities of Delhi and Mumbai.

SABI - Central America

Financial summary                                                                  US$m

Turnover                                                                            186
Trading profit                                                                        7
EBITA                                                                                22
Operating margin (%)                                                                3.5
EBITA margin (%)                                                                   11.9

Sales volume (hl 000s)
- Lager                                                                             624
- Carbonated soft drinks (CSD's)                                                  2,231
- Other beverages                                                                   824

* Four months

The Central America businesses in El Salvador and Honduras were acquired with
effect from 28 November 2001. The first four months of operations have been used
to ensure continued volume growth, particularly with increased competitor
activity in both countries, and form an effective operating relationship with
our Bevco partners.

Each business is focussing on improving efficiencies whilst we extract synergies
from distribution systems and shared support services, both within and across
the two countries. Non-core businesses are being assessed, made more efficient
and competitive, and then either incorporated or rationalised.  Major
opportunities exist in the area of procurement, where supplier numbers can be
optimised, bulk ordering utilised to obtain better prices, and cross business
and country planning used to limit inventory of raw materials, finished goods
and machine spares.  Consideration is being given to shared service centres to
further improve cost efficiencies and operational effectiveness for Bevco.

Brand development has primarily been in the soft drink arena as we support The
Coca-Cola Company to increase its product range and therefore overall volumes.
New carbonated soft drink flavours (e.g. Fanta in Honduras) and non-carbonated
beverages (e.g. Powerade in El Salvador) have been successfully introduced in
addition to a focus on ensuring that proper pack pricing architecture is in
place.  In the beer business a 500 ml bottle has been introduced in Honduras and
brand rationalisation continues in both markets.  Appropriate service levels are
being determined for the different customer segments and investments made in
containers and coolers.

The focus for the new financial year will be on business rationalisation;
improved efficiencies in sales, distribution and manufacturing; sales volume and
revenue growth, particularly addressing low per capita beer consumption; and,
standardisation across all operations.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               8

Beer South Africa

                                                        2002           2001       % change
Financial summary                                       US$m           US$m          US$            R

Turnover                                               1,112          1,365         (19)            8
Trading profit                                           287            343         (16)           11
Operating and EBITA margin (%)                          25.8           25.2

Sales volume (hl 000's)                               24,246         23,904           1

Despite the ongoing tough trading conditions, particularly in the first half of
the financial year, Beer South Africa was able to see out the year on a note of
growth. Overall volume growth of 1.4% was achieved for the year, reversing the
negative 1.1% at the half year. The operating margin improved by 60 basis points
to 25.8% and an admirable compound five year EVA(R) growth of 19% was delivered.
Operating profit grew by 10.5% from R2,520 million to R2,785 million.

Volumes recorded growth in the important second half of the year, supported by
promotional activity and an earlier Easter period.  The factors negatively
affecting volume growth, as reported previously, remain in place but in certain
respects the impact is lessening.  However, higher interest rates, the steep
rise in staple food prices, the rising fuel price and continued wine surplus
will adversely impact beer consumer propensity to spend. Exports experienced a
strong performance particularly in the Angolan and Namibian markets.

Throughout the year efforts have been directed at investing for growth including
the building and enhancing of our powerful brand portfolio. As measured by AC
Nielsen, Beer South Africa improved its market share in the premium and
flavoured alcoholic beverages categories whilst maintaining its leading position
and share in the mainstream category despite significant competitive activities.

High raw material increases experienced during the past year were primarily
driven by the weaker rand. Programmes introduced in recent years including raw
material procurement and related hedging activity, as well as technical
innovations on certain materials and brewery usage improvements, contained these
increases. Further productivity benefits were delivered by the World Class
Manufacturing programme, the general spend procurement initiative, improved
brewery and distribution efficiencies, lower headcount and the fact that once
off costs were reduced from the previous year. The performance of our premium
and AFB brand portfolio also delivered a positive mix effect. These benefits
were to some extent offset by real expenditure increases in marketing,
information systems, overall compensation, training and development as well as
corporate social investment.

All aspects of the balance sheet were closely managed, in particular working
capital, which for the seventh consecutive year showed progressive improvement.
Capital expenditure in the current year was reduced following the previous large
scale investments at SA Maltsters, Ibhayi and systems development.

Following the promulgation of the Competition Act in 1998, Beer SA has
introduced a proactive compliance programme. Three formal investigations which
were initiated by the Competition Commission have been satisfactorily concluded.
The Commission has notified the company that the 2000 investigation into
horizontal restrictive practices in the industry would not be referred to the
Competition Tribunal.

While progress on the revised Liquor Bill, following the Constitutional Court
judgement, appears slow, the DTI has indicated that it intends having a new Act
promulgated within the next twelve months. Based on previous assurances from the
Ministry, expectations remain that a rigid three tier system will not be imposed
on the industry.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                               9

Other Beverage Interests *

                                                        2002           2001         % change
Financial summary                                       US$m           US$m          US$            R

Turnover                                                 676            816         (17)           10
- ABI                                                    500            585         (15)           13
Trading profit                                            95            106         (10)           19
- ABI                                                     79             88         (10)           20
Operating and EBITA margin (%)                          14.0           13.0
- ABI                                                   15.8           15.0

Sales volume (hl 000's)**                             11,912         11,485           4
ABI (hl 000's)                                        11,488         10,968           5

*    ABI, Appletiser, Distell

** Distell volumes not included


ABI's volume growth for the period was boosted by good performance in the second
half of both carbonated and other soft drinks, as well as the first time
inclusion of two small businesses. Total volume for the period ended 4.7% above
prior year (organic 3.8%).

Financial performance was enhanced by operational efficiencies and productivity
in administrative and support functions and through rationalisation initiatives.
Operating margin continues to improve, despite a decline in the earnings of
ABI's associate company, Coca-Cola Canners.

There has been a strong emphasis on improving market execution, resulting in
mainstream carbonated soft drink volumes showing satisfactory growth.


Appletiser had a very successful year with strong growth in volumes and a
pleasing increase in trading profit.

Good volume growth was achieved in South Africa, where the Appletiser brand has
been repositioned and additional resources committed to both sales and brand
marketing activities. Double-digit volume growth was achieved in international


The group's 30% equity accounted interest in the listed associate, Distell,
delivered a much improved operating performance in spite of a decline in sales
volumes, as greater emphasis on product profitability in the domestic market was
reflected in a favourable sales mix at improved margins. Rand weakness helped to
enhance export earnings and attributable adjusted earnings, after reorganisation
costs, were up nearly 40% in local currency terms.

The Competition Commission enquiry into the 1 July 2000 merger between SFW and
Distillers is nearing resolution and Distell management are hopeful of a
satisfactory outcome.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                              10

Hotels and Gaming

                                                              2002         2001         % change
Financial summary                                             US$m         US$m           US$           R

Turnover                                                       164          206          (20)           5
Trading profit (see note)                                       28           25            12          53
Operating  and EBITA margin (%)                               17.4         12.1

'Revpar'                                                   R232.80      R205.70                        13

Note:  Adjusting for the write-off of pre-opening expenses and other non-
recurring items, including the impairment of Monyaka, taking account of the
disposal of Southern Sun's 20% interest in Sun International in the prior year,
trading profit for the year would have been US$30 million (2001:US$30 million)
on turnover of US$164 million (2001:US$189 million).

Hotel division continued to manage proactively both its portfolio and cost
structures in response to market conditions. Trading in the fourth quarter was
encouraging, to leading to an annual average occupancy of 65.7% (2001: 65.4%).
Revpar increased by 13.2% to R232.80. Portfolio changes included the disposal of
the Sunnyside Park Hotel and the termination of leases for the Oudtshoorn and
Wilderness Garden Courts. The Cape Sun Inter-Continental was rebranded a Holiday
Inn and the 157 room Dar-es-Salaam Holiday Inn opened to strong trading.

Tsogo Sun operations at the Montecasino complex reported encouraging trading
results especially in view of the highly competitive Gauteng gambling market.
The Hemingways Casino and Hotel in East London was opened but trading to date
has been somewhat disappointing. The Nelspruit and Witbank casinos traded in
line with expectations and work has commenced on delivering the final aspects of
the bid commitments for these two licenses.

In December 2001 the Gauteng Gambling Board awarded the previously disputed
sixth license in the West Rand, to which award Tsogo Sun has launched a legal
challenge. In Durban, Kwa-Zulu Natal, Tsogo Sun has resolved the legal challenge
to its license award and as a consequence will have a reduced shareholding in
the project but will retain management control. Building work for the first
phase of this R1.4 billion development is in progress and trading should
commence in December 2002.

Overall, trading profit in SA rand terms improved by 53.1% (12.0% in US dollars)
as a result of the improved operating margins from 12.1% in 2001 to 17.4% in
2002. The outlook for the forthcoming year is positive. Strategic options for
this investment continue to be investigated.

Financial review

Segmental analysis

As included in the interim results, segmental disclosures have been expanded to
report SAB International in three distinct segments, including the recently
acquired Central American interests.

Accounting for volumes

Reported volumes exclude equity accounted associates where the group exercises
significant influence but primary responsibility for day to day management rests
with others (such as Distell and Castel). In these cases the financial results
of operations are equity accounted in terms of UK GAAP.

CHIEF EXECUTIVE'S REVIEW (continued)                                                                              11

Profit before tax

Profit before tax, excluding exceptional items and goodwill amortisation, of
US$668 million was up 0.4% on prior year, reflecting the impact of increased
interest charges as the group borrowed to fund expansion and investment in the
current year.

Exceptional items

SABI Europe recorded net exceptional items of US$8 million comprising brewery
closure costs in Romania at Pitesti US$9 million and an impairment of Ursus
US$10 million offset by a release of a prior period impairment provision in the
Czech Republic (US$11 million).


New borrowings included the US$328 million private bond placing and the US$600
million convertible bond. The combination of these new borrowings and the
issuance of 64.7 million new shares in December 2001 have been utilised in the
funding of acquisitions. Following these activities, the group's gearing
increased at the year end to 40.8% from last year's 36.5%. Nevertheless, the
group has substantial unutilised borrowing facilities.


Net interest rose sharply as the group borrowed to fund new acquisitions and, at
US$98 million, was up on the prior year's US$54 million. Interest cover is still
satisfactory at more than 7.0 times.


The year under review saw an increase in the group's effective tax rate, to
31.2%, from last year's restated  29.3%.


Intangible assets increased by US$937 million, due primarily to the inclusion of
goodwill of US$930 million arising on the Central American acquisition in
December 2001. Goodwill in ABI is considered to have an indefinite life
(consistent with prior years), all other goodwill being amortised over 20 years.
The attributable charge for the year under review rose to US$46 million from
last year's US$20 million.

Cash flow

Net cash inflow from operating activities before working capital movement
(EBITDA) rose to US$904 million, from last year's US$854 million. The ratio of
EBITDA to group turnover showed further improvement to 24.3%.


During the financial year, the US dollar again demonstrated strength in
international currency markets ending the financial year at R11.40 to the US
dollar in South Africa. As a result the weighted average rand/dollar rate
declined by 24.4% to R9.71 (compared with R7.34 last year). Dollar strength also
negatively impacted certain of the operating currencies of our African


The board has proposed an unchanged final dividend of US18.5 cents making a
total of US25.0 cents per share for the year. Shareholders will be asked to
ratify this proposal at the annual general meeting, scheduled for 31 July 2002.
In the event that ratification takes place, the dividend will be payable on 6
August 2002 to shareholders on either register on 5 July 2002. The ex-dividend
trading date, as stipulated by the LSE and JSE respectively will be 3 July 2002
on the London Stock Exchange and on 1 July 2002 on the Johannesburg Stock
Exchange. As the group reports primarily in US dollars, dividends are declared
in US dollars. They are payable in sterling to shareholders on the UK section of
the register and in South African rand to shareholders on the RSA section of the
register. The rates of exchange applicable on 24 May 2002, being the last
practical date before the declaration date, will be used for conversion ($/£ =
1.4575 and R/$ = 10.0500), resulting in an equivalent final

CHIEF EXECUTIVE'S REVIEW (continued)                                                                              12

dividend of UK 12.6930 pence per share for UK shareholders and SA 185.9250 cents
per share for RSA shareholders. The equivalent total dividend for the year for
UK shareholders is UK 17.2931 pence (2001: UK 17.6309 pence) and for RSA
shareholders is SA 250.6000 cents (2001: SA 197.3663 cents).

Annual report and accounts

The group's unaudited summarised financial statements and certain significant
explanatory notes follow. The annual report will be mailed to shareholders early
in July 2002 and the annual general meeting of the company will be held at 11h00
on 31 July 2002.


South African Breweries plc                                Tel: +44 20 7659 0100
Nick Chaloner           Director of Communications         Tel: +44 20 7659 0119
                                                           Mob: +44 7880 502 755

Anna Miller Salzman     Head of Investor Relations         Tel: +44 20 7659 0106

Ciaran Baker            Head of Corporate Communications   Tel: +44 20 7659 0120
                                                           Mob: +44 7979 954 493

 This announcement, a copy of the slide presentation and video interviews with 
                             management are available
                                        on the
                      SAB plc website at 
            Video interviews can also be found at

               Pictures for the media are available from

     Copies of the press release and the detailed Preliminary Announcement are 
                      available from the Company Secretary
at the Registered Office, or from 2 Jan Smuts Avenue, Johannesburg, South Africa.

         Registered office:  Dukes Court, Duke Street, Woking, Surrey, GU21 5BH

                           Telephone: +44 1483 26 4000
                          Telefax:      +44 1483 26 4117

                      This information is provided by RNS
            The company news service from the London Stock Exchange


FR BKCKDNBKBBPB                                                                                                                                                                      

a d v e r t i s e m e n t