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South Africa: SABMiller Likes Thirsty Russians
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Business Day (Johannesburg)
2 July 2008
Posted to the web 2 July 2008
Nicola Mawson
Johannesburg
SABMILLER, the world's largest brewer, expects to spend about $2bn in capital expansion in this financial year, about half of which would be spent on growth projects.
Last year, the company spent $2bn in capital investment, an increase on the previous year's $1,2bn, as it sought to sustain medium-term growth . In this and the next year, the brewer would spend $370m in Africa.
Chairman Meyer Kahn said in SABMiller's annual report released last week the group's investment spending would remain high . The group recently upgraded breweries and built new facilities in Colombia, Russia and China.
SABMiller has been focusing on growing in developing markets and is set to build a brewery in Russia. The $170m project outside the city of Ulyanovsk, east of Moscow, will have an initial capacity of 3-million hectolitres.
The new brewery should be operational early next year and would complement the group's existing brewery in Kaluga, southwest of Moscow.
In May, SABMiller bought Ukrainian brewer CJSC Sarmat.
SABMiller Europe MD Alan Clark has previously said the acquisition of a 99,84% interest in the Ukrainian company - representing a gross asset value of about $130m - marked the brewer's entrance into the "fast-growing and attractive Ukrainian market".
In Africa, SABMiller would spend $370m this financial year and another $370m in the 2010 financial year as it sought to benefit from the continent.
Projects include the development of greenfields breweries in Tanzania, Angola and Mozambique as well as soft drinks plants. SABMiller will also expand its existing operations and invest in container replacement.
Africa and Asia account for 34% of SABMiller's sales volumes, but only 14% of revenue and 13% of operating profit. However, judging by South African consumption levels, there was potential to increase consumption ninefold on average, the group said.
The brewer has operations in 13 countries, including Botswana, Lesotho, Swaziland, Tanzania, Uganda, Mozambique, Angola, Zimbabwe, Zambia, Malawi, Ghana, Comoros and Mayotte. Together with French partner Castel, SABMiller has operations in 32 out of 53 African countries.
In SA, South African Breweries (SAB) was coming to the end of Project Calabash - its phased container project, which would manufacture 430-million new bottles . The project aimed to rejuvenate the design of its bottles at a cost of $120m. Th is investment is part of its plan to uplift and upgrade its mainstream beer offerings over the next two years.
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Project Calabash is part of SAB's R5bn capacity and capability project announced at the end of 2004. Greater capacity would allow new brands and pack sizes to be introduced.
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