DBRS Upgrades SABMiller and Related Entities to A (low), Stable Trend

DBRS has today upgraded the ratings of SABMiller plc (the Company) and related entities to A (low) with a Stable Trend. Today’s action reflects a continued improvement in the Company’s earnings profile that results from a superior market position and growth in developing markets, and the continued enhancement of SABMiller’s strong brand portfolio.

On September 18, 2007, DBRS revised the rating trend to Positive from Stable to reflect strong fundamentals in most of the Company’s key markets, combined with the Company’s continued focus on investing for growth and the expectation of improving earnings and cash flow. SABMiller continues to deliver improved results, with net revenue and operating earnings increasing to $17.1 billion (+15%) and $3.4 billion (+18%) respectively for the fiscal year ended March 31, 2008.

SABMiller’s lager volumes increased 11% in F2008, continuing to consistently exceed industry growth rates, due mainly to the Company’s leading share (typically number one or number two) in higher-growth developing markets. The Company continues to take advantage of its strong presence in emerging markets by making significant capital investments in regions such as Africa, Asia, Latin America and Eastern Europe, which continue to experience higher growth rates than the mature markets of North America and Western Europe.

The Company has consistently improved the strength of its 200-plus brand portfolio through product innovation and acquisitions. Product innovation has been a key driver in improving performance in lagging mature markets such as the United States. In addition to ongoing smaller tack-on/tuck-in acquisitions, the Company has been successful in completing major acquisitions such as the 2005 acquisition of Colombia’s Bavaria and the 2007 acquisition of Dutch brewer Grolsch, both of which enhanced the Company’s scale, premium-brand offering and growth opportunities.

Following several years of strong organic growth and acquisitions, the Company has reached annual production of nearly 300 million hectolitres and has been able to leverage this increased scale to lower costs and generate greater production efficiencies. These cost savings, combined with improved product mix and pricing flexibility provided by an enhanced brand portfolio, have contributed to consistent margin improvement and earnings growth. Going forward, DBRS believes SABMiller’s improved earnings profile, strong fundamentals in developing markets and initiatives like the pending MillerCoors joint venture should continue to offset higher commodity costs and the effects of lower consumer spending to maintain continued earnings growth. DBRS notes that the joint venture is expected to provide SABMiller with 58% of an estimated $500 million in cost synergies in year three. The joint venture has received regulatory approval and is scheduled to close in June 2008.

Although the Company’s financial profile has remained strong due to rising cash flow and ongoing debt reduction, leverage increased more than previously anticipated in F2008, following the Company’s acquisition of Grolsch. Lease adjusted cash flow-to-debt at year-end March 31, 2008, was 32%, down from 38% at the prior year-end. DBRS believes leverage remains acceptable for an
A (low) rating, given the Company’s strengthened earnings profile and expectation of continued earnings/cash flow improvement in F2009.

DBRS believes the Company will remain well placed in the A (low) category based on the expectation of continued earnings growth over the near to medium term; however aggressive financial management resulting in a material increase in leverage could pressure the Company’s ratings.

Notes:
All figures are in U.S. dollars unless otherwise noted.
This rating is based on public information.