SABMiller to review its stake in Tsogo hotel group
April 2014 was an interesting month for SABMiller watchers. Not only did the world’s number two brewer announce job cuts at its South African soft drinks operations, it also released full year volume figures which were modest and led Reuters news agency to title: “African troubles hamper SABMiller sales” on 15 April 2014.
The brewer reported overall sales volume growth of 2 percent for the financial year ended 31 March 2014, with lager volume up merely 1 percent and soft drinks up 5 percent. This moderate volume increase was attributed to troubles in a number of African markets that have been fuelling growth for the past few years.
In Zimbabwe, lager volumes declined 18 percent due to a weak economy and also fell 2 percent in Mozambique as political tension limited demand for beer. A dramatic increase in excise tax in Zambia hurt sales there as well, it was reported.
A later Easter holiday pushed back sales into the current financial year that started in April and unusually cold weather in the U.S. hurt sales in the fourth quarter (January to March).
In Europe group revenue on an organic, constant-currency basis for the full year was flat, though the company said trends improved in the fourth quarter.
In Australia full-year volume, including discontinued brands, fell 8 percent because of intensifying competition.
SABMiller said further that revenue per hl rose 2 percent for the year, but the company warned that depreciation of key currencies against the dollar would hurt its reported results, which are due to be released in May.
Analysts noted with interest that SABMiller, which also sells Coca-Cola beverages and other soft drinks in several regions, has recently been putting more focus on soft drinks.
Moreover, there is speculation why SABMiller announced it was reviewing its “non-core” holding, worth about USD 1 billion (EUR 724 million), in South African hotel and casino group Tsogo Sun Holdings. Tsogo Sun has more than 90 luxury hotels in seven African countries including Nigeria and the Seychelles. However, the group’s major income contributor is gambling.
SABMiller holds a 39.6 percent stake in Tsogo Sun. Of course, a review is just a review and there is no certainty that the review will result in SABMiller taking any action.
“They’ve never been very active in Tsogo Sun, but there’s been a change of leadership at SABMiller and maybe with that there’s been a change of approach to these non-core assets”, said De Wet Schutte, a Cape Town-based analyst with Avior Research.
SABMiller’s interest in Tsogo dates back to the pre-end-of-Apartheid-days, when it controlled retail (OK Bazaars), textiles (Da Gama), consumer products (Lion Match) and footwear (Conshu).
The possibility that the brewer may consider selling its stake in Tsogo Sun increased after SABMiller merged the company with Gold Reef Resorts Ltd. in 2010, a transaction that reduced its stake from 49 percent.
SABMiller did not say if they negotiated a put option then.
Tsogo Sun’s other main investor is Hosken Consolidated Investments Ltd., which owns about 41 percent.
“It’s unlikely that one single entity will take up all those shares, as there’s not a lot of buyers around with that kind of cash and empowerment credentials in place,” Mr Schutte was quoted as saying.
Tsogo Sun said it was assisting SABMiller with the review.
