The Hindu Business Line : SABMiller set for turnaround

Bangalore March 14 SABMiller's operations in India are finally set to turn around with the company expected to make profits during this fiscal (2006-07) on a turnover of around Rs 1,300 crore.

SABMiller's operating company in India, Skol Breweries, has however accumulated losses of around Rs 170 crore though it did not incur any cash losses during the preceding two years: 2004-05 and 2005-06.

It is expected to post around Rs 5 crore profit before tax on a turnover of Rs 1,300 crore for fiscal ending March 31, 2007.

Its profit before tax is expected to rise to Rs 6.6 crore on Rs 1,427-crore turnover for 2007-08 and by 2008-09 its profit would treble to around Rs 18 crore on a turnover of Rs 1,578 crore.

SAB Miller's Indian operations' director, Mr Sundeep Kumar, said this was largely because of better profitability on account of driving better efficiencies through operations and scale and also because of sourcing funds at a lower cost.

The operating margins of the company has been eroded by the cost of borrowings as a consequence of the high dependence on borrowing to fund expansion currently, Skol's annual report says. It says the board is currently looking at opportunities to reduce the dependence on borrowings.

During 2005-06, MBL Investments, the holding company, and SABMiller Asia together infused capital amounting to around Rs 348 crore.

The total investment into the Indian operations by SABMiller is around Rs 1,000 crore. During 2005-06, the company invested around Rs 136 crore in capacity expansion and the upgrading of plant and equipment.

Meanwhile, sources said SABMiller is planning to roll out big projects in another six months, which will add 4.5 million hectolitres capacity.

This would be through a combination of greenfield as well as brownfield expansion of breweries. SABMiller has already started rolling out Foster's nationally and is being currently produced in four breweries.

Foster's is expected to add 4.5 million cases every year, which will take SABMiller's production to 35 million cases annually. Over the last one year, SABMiller has more than doubled its capacity.

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