SABMiller to tighten belt by further $550m
Anheuser-Busch InBev take-over target SABMiller has increased its annual run rate cost savings from its initial goal of $500-million by March 31, 2018, by a further $550-million by March 31, 2020, across an addressable cost base of about $10-billion.
The JSE-listed beer and soft drinks business announced its cost and efficiency programme in May 2014, with the increase in yearly run rate cost savings reported on Friday expected to further build on the initial success of the 2014 programme.
SABMiller CE Alan Clark said: “Our recent trading statement highlighted our accelerating growth in the second quarter. Another key plank of our strategy is to build a globally integrated organisation to optimise resource, win in
market and reduce costs.”
“While we are already a highly efficient business with strong [earnings before interest, taxes, depreciation and amortisation] margins of 38% across our 20 largest managed beer markets, we are continuing to remove duplication
across markets, bringing specialist expertise in areas like procurement under one roof and standardising common processes.
“It results in our markets being freed up to concentrate on what they do best –growing revenue with local consumers and customers.”
The cost and efficiency programme, which covers SABMiller’s integrated supply chain, comprising procurement, manufacturing and distribution, delivered $221-million of annualised savings in its first year to March 31 and was expected to achieve in excess of $430-million of annualised savings in its second year to March 31, 2016.
“The additional savings will come from SABMiller’s integrated supply chain, with about 70% of the additional savings announced on Friday coming from procurement and 30% from manufacturing and distribution,” SABMiller advised shareholders in a statement.
The savings would mainly be realised by increasing the spend centrally managed by SABMiller’s specialist procurement team to at least 90%, from 46% in the year ended March 31, 2014, and 69% for the year ended March 31.
Completing the roll-out of procurement operating models to increase efficiency through greater transparency, cost management, compliance and delivery of savings was also noted, as was driving further efficiencies in manufacturing and distribution based on best-in-class benchmarks and standardised processes.
SABMiller expected to incur incremental nonrecurring costs of $26-million by 2020 and no disadvantages were expected to result owing to the programme.
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