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Comprehensive Case SpringZ00Z

,A.t A hrom Beveroges Cornpon ".ASC* U

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After rcading thc case,you are required to anllJze thc ctse from a strategic
perspectivc keeping in mind to cover as manv issuesas following list:

exislin lgygt for ABC Co.? oppoftunilies I what rypes of mxrket on the theoPponunitiesl opponun capitalize Io cg.Pitalize \\'har r|har srrare-sies srrereqies ri6flifi6iiimDleme0t ro rGfEETmpiiment ducts and non-

such (Basedon se-s@!on variables, a_]9g!gli:=gL9duca?

qeograDhrc. elc.l etc. raDhic.osvcho sraDnlc. sraDhrc. ) Dsr'cho

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in Egypt? ls rhispositioning suitablelbr the andBirell PosidonEd i. Horv are Fat'rouz torunds tltese tso brands? ofeacharea Culfarea? Whataredrekey-p,erceplioos 4. AJe Al Alram's sralesies in the domcstic market consisreutwirh rhe extemirl ...-... :

3lfgglmelIj

strategies? ondrveakncsses ofAl Ahnm's current 5. Whatarethestreneths

tbi.{l .\hramCo ? futureproblems 6. vhal .re someDotential itndbu1'ers' cultomers' improve 7. Do :vou ha\.eanysu 5atisfaction? :gg_e_sgolEt9_!,trPl9jg!9:t!3il
iD to eotv benejlial or derimenEl to.{BC-s foreienoperations 3 .Are , rb. bar.-riers
'

compdt *lis? rermsof pricin!-attd

to tlte\\'TO age.meotlhatwill be in effec(in ?00j: 9. I-{o!vshouldABC respond ctrslomers.' 10. \Vhrt has.{BC doneto n1sfli]l dilt{S4!srd!-of intemational thertl Vhar morecor.rld bedoneto accc-mrntrdaie Il. Nho are-\BC's comp..riiors.' polic]".' govepnanc-' andthehurnan resources rhechanees in corDorrle l ? .Discuss ol.{BC? $oulcilounrrketo improte tlietinancili l l . \\,hcrsuqgesrions Fertbrmanc. ::--,-14. Cornmenton the recentofilr to buy lhe.ompa'ly's stocks by an iotemational company.

L S t r a t e g i cO u t l o o k
At Ahram B,evera_ges Company,s(ABC) obiective for the nex few years is-to !99!q a rully fledged beverioe com, mat omina er marke stimulatin rowlh and enelrating the tocal,paE L,n9e!!9!gUlry-rn&l
^l

ff effi "*;"?"",l,l"iil :i,I.TiJ::l;i'"t*::?:iSE;;';ffiiiXffi '3;*:1J"":':t;,"#"*i:?--d#::"#"il""fi5: ;,""Uffi ;,i,ffi.,!:,[:fl.:'i"J?g ffi i'ff ;:?eJ:',"i:l.l#sil=ffi j [#"?"ii;il3t1l?lLJ] ffi il1,'"3*'Llli"JiF**:'l :fl""t -11: r:r-!i,",i,ii[1il'T#"?""J";"1 jJl?liillil; ;t:: ;' H .ru, ^E E', i1i;i;?."."':::,% fi', investin its i:T :i arm. Reach. as-r"eii as in its )anning |j:!!b:qg" compg1y M":yF:f At ai,.a.
,r,u'dcLunn9 & Ft ing COmija

J;:i::,"

Auj n"" inyesled inastelc_sthe aJi :,:j,"?::,iy,", ! t9!ry, builtunder

:rlsslt!g!q.:pd:

canni

ior.

j;,-ffiffi ,",*:i:f eirb4Tiyiy22igig',;";g *;#.":,;;;5i

We expectABC to continue its arov

nor:rcohor;c sates vor,sg1ly55#1il=w',i""i1i"!"1'J,1"#X"ffi3-i:t beer

Comparedto our end oi year taraet - Ptfl"' ABc s-till has.upsidej9tg"-i'fl.._"llg"_6

market rne. Taintain dominance comrng years.The"o.0";; *,ll1l1l:A.arld in oo Inrs by increasing.its sales believe volumes. Adis "r""r,"r'.ii-r"J"r,.."rrr We

nence ourBUy reccnimeridation.

I '1,

*' / {

, I I .V a l u a t i o n
D i s c o u n t e dC a s hF l o w we havearrived cashflowvaluqlgnmethod. Using a d-iscounted alan equjh, vahii, ,t *E ,.i'l i:iiiioir ., d d irar: pci srdre "r .E LJ roi ^trL. tne company is curenily to our DCFper sharevalue. tradingat a 23.5%discounl

(WACC) lhe 1!:!,%weighled average costof equity We calculated usinga 17% groMhrateand an 11olo costof debton the basisof cost of equity,a 4% perpetual Wecalculated an63i.5%debl. thecostof equity 68.5%equity on thebasisof an guaraiiteed by government rist free raiElpBvided National Bankof Egypt i t.5"2" certiiicates.
Ca!h Flowsensitiviw Analvsis Table 2.1: ABC's 0iscounted Cost of Equity 16./.

17%

17.5%

1B% 74,

Terminal Growth Rate

85 8B 92 96 100

82
8B 92

79 82

BB

82.
85

s2

valuation Muttiples

ralher cf LE 85 / 5 25 is basedon the DCF method, than on a Our largetpdces for the reasonsmentionedabove. Thj+!arcg! .pd.-q.e_:ggg9:1: multiplevaluatjori, is BUY ol39%iof theGDRS.Joside ootenlial hence ouf recommendatlon

@ We have compared ABC lo jotherm 'other breweries operating in ErciyaaBiracilil( Tqrt<ey 9.9 Eeverage Turkey emerging countries. These EFES 9.1 Af.ican breweriesare different lo ABC, in :South .I Breweries South Africa that; j EGE Turkey 10-9 Biracilik 1. They have .significeotty Jowe; Poland Zy\leic 8.3 Hartwall Finland 10 ^ :,. ---+., z 0{any ol Inem operale In Russia r.5 sun lnterbre'.r' couotries that are not -ffi preoomtndnltylviusttm. \ ..__:l_.___-l margi!$an.r..rarket 3. They havey'6W6(EBITDA sharesthanthoseofABC. lFese Comoared to companies, on an EV/EBITDAbasis.ABC is lrading et a discountoi 26%.Whenwe put the companyo-nthe averageEV/EBITDA multiple. valueoer shareof $ 22 for its GDRs. w-earfiveat an imolied

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non alcho(ic /r in tl s ?w iu,s]rv,

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cl onc4l^ l,arltol

lll. MarketD
ABC has a naturalmonoDolv ovFr the Egyptianbeer market. The companv currenuv commrn.lc I'{T":.".uiT"'-k - ' , r h o . - - ]19o1'""o"ou",ps%-oii##="^ft

iTluf

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:*;:"*.tJ::l:,.T;" *;*#x*tr is,*ml

nlialfor the b

cultural chrn meanthatlocal patterns a-re r"rg"t ""ri"."."".1'ii',g,^t^t cons .]L.Egyo'

continuings.:ial and

7l'teo'lene c!. b consumprion fu veL;2t , 4eer caoit" n ._____<>

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Growth PotentialoJthe

;^,,^,--,, luu ,rcr Ine eflecls of a

,''i.3.F,,:-,'i!r","T?ll,,"J#!',iirii;'l*.:;i,ni

_*_-_::f::9tlr_" 'Z volumes arq tinked direct,y 1^1c_:.:"*s to tourism. whichis rac"

y,T,:,1_,;?,?,; ;,31ff 1ill::,,J,:1,,j:::.[::;,:":id;,;H.f a falt in ABC.S ::1,.;1.:ii,j:^i":"J";;;;;"";,,;,i'd""T"i"Jff :", advantages

'11":l: ".Tld slump r,scar in rear GDp i'ea.t gggrzorij 'or i'" ,,".,'l"""rfi srowh
,r! uclvvc

LUirexl economic condilions in F.v^

Atcoholic& Non-Alcoholic Beer Market

jrfeeono dEceleration "ecererarron irreeo_ir@;

lnal A

that could

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Flgure3.2:Tourist Numbers

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. is under serviced. Thebeverage industry in Egypt Beer consum high,despite a demandremains
still low

ABC has plansto expFndinto neighboringmarkets in the region in order'to'marketbase.

fo'

ltDild3liq

sinslecountryexposure risk and to take advantage of a broader

vS 'The key factor will be the qualityof its inanagement. of ABC'S success Over' see an in whi6h the comingmonlhs,we are likely to environilenl dynamic forcedrivingstron-o management straiegies will be-lhe-primary eamings groMh. ABC planning _:trclgL4{lCglg__slrategEs, which will include .is rmpraygE-qU?lity, g[gej_et-v'araety, _mAlelcompetiUye.-pncing Arrq_-plgIlAliqls. These strategies.willundoubtedly inclggs9.jemand amongst previously unexplored consumers. --,
':---'
We expect the consumptjonand market penetration of non-alcoholicbeer to grow sicnificantlv. countries,non-alcoholic ln Egypt,unlikemost non-Muslim beer is beingmarketed alte.native lo soft drinks.ratherihan as as a favorable a hcalthier elternativeto alcoholicbeer. ABC is iargeting -- this market -. . Ca-qeisiYel,

'

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EntryBarriers

-'----->o

significantly-redu-ing-i56petitioa lmporters abroad. of alcoholiclee{ forABCFrom mustpaya "r**++S!99!ry_g will not be aflected by the(yTO/j 30c%. This is is only agreement agreement untii2005. until dqty duty only55:/o. 55%.' 2005. X6;;G Non-alcoholic 6ifbe-E-import beerimport ) orLt*
oYl oL-Nile Loc.si competition is minimal, especiallv follow-|ngABC s a_qAqLsitian Company. is(El Gouna Be'/erage\ Be'/erageS) Brewery.Therdnlvel[er er doqestic domestic compelito, Whicli slarted opefationsin the tirst quaner ol 1V99Jl its bru^rng lac'lil'/ .(, Hurghada, on the Red sea, with a capacjtyol 60,000hl. El Gouna SeveraEes Co m p e t i t i o n

There are( gevere baniert that discouragethe impoGtion of alcoholicbeer,

tl nlt

f'

'i/ill be able p'oducesonly6icohqlic, bepr.lt_E_lg!_li!gll_.lha!g{. local .comptitors expeflence experience to conlend coolend con wrth ang dlstribution and olstnDulron Atsc economies scale. ol alqouclon _ - withXBC's . : - s - economies : . ' oi - scale. i oro]duction generateo. nas 91!9 ilelS..lovejytne company
Large, foreignproducers are also unlikelytb flnd essy entrance into the locel
markel. This is because currently,the siie of lhe Fgydi^n m2rkei nrlPs o(ri ihe poasibility of anol[c{ lalqloroducr. Second'y, a oroducer would incur hrrge

opGia-tionat tosseswer ?4 ul4paD.!91:jqd-i[g.dei,,lEt-5g.Ul9-.?.0.-e!.9sua!e-ngrket sh;rettrtt wouio pEimltit to slart returning e. plgIjJ.Thirdly,the Eqyptian

I V . C o m p a n yB a c k g r o u n d& O p e r a t i o n s
,./ ^ v
Background

ABC is more tt'"n lQq f"{"

:

qldl:rltwas established in 1897,nationatizecr in

. , J - r

ABC has an authorized capitalof LE 150million and a paid-incapital of LE g0 million, divided into20.5million shares of LE 5 each. Sinceits prjvatizat'on, management at ABC hassucceeded in lransformiog fhe .,sh ^^w inlo an allyg_jfiyAle company a s.ubst?ntialllr...nrofiJahlF .from cgll!1nlqy improvingthe quaiitv of the companv'sproducts, expanding its 'distributionnetworks and fol0lls.?rl. 9ffeglvelQarJre.li09 te?m ABC is one. of a le\./,ex-public sector companies thathas seen realchanqein cglpglalqand,functional strateoiessince its privatizationMany cdfiFlnieslhat partlally privatized have either been fully or still suffer from weak management as ultimale mnagementcontrol has largelyremainedwith the former.holding companies. This invarjably results in poor utilization.of the companies' resources. Companies that have seen good groMh lrends are limiied, thereforemost of the groMh they have witnessed can largely be put down to the natural developmenlof their respectivemarkets,rathe. than the fruits of pfivatization. Tle completetransfer of management a!]!ger to a nevj teah oi enlrepreneurs wtth an intemalional track recordin.the beverageindustry. transiormed ABC, resulting in the company's iously undermined

> i..i '',r,,ti;-i .

'ABC had 4.5 million sha tion, with a nominal v--alue v-6,uE of ur LE_2 LE z\r,_grrllr. t e new tl|ilnijge,ltenr e r)ew managenientteam ream onereo offered an an emotovee employee ano and aexequle.j -qveltiv_years! In November 1999,a 1:4 stock split took place and

useomore

j-6-e-> oi 622,5Q9_ in trie formot66ii6ii-Tr lhare-S 1el'."9.e_JnFi!rss9!ti"5plan :

lne number ol shares outstanding incteased lo lB million and tlie number of sharesin the optionpla!_incr_ease4!L2.Q million. We are assuming a fully diluteci besis of 20.5 million in all of ourcalculations. shares

Figur-.4.1:ABC's Shareholder StructureBefo.eandAfter Executionof its Optionplan

ProductionFacilities & Capacities , . .. ''

I "\*

ABC owned three factories prcducing alcohoticand non-alcoholicbeers and soft drinks.These were located in Cairl), Alexand.ia and S[4[pya. The company ccquired Nite Brewery in Badr ?i{'. ABCE9- orrtv recnuy_l llnished- bu_ildio; Cily. which wi reptaceits taclory in Atexandrii d--ljte.enhe.ld .Btewbryin Et-O_bour

ttvtrtn

("ibrcb-basntirdt-cqt=rirfta-Ow;nr.ffi

-- ; t' a I ot,.ABCs tffi{,r st,a,r : \\ilJccotinLre ro nrq. ,ce non-arcolEiiilEiand soh 1-. r'9j_9 -+ l4 [ron) j:ry-rrf1g!1 ::,'.1. on profits ; Bc s E;Obourlactory not l.or, r., iro " '" '' r- llT;Einliofr;ls,i-nn;lii- ,:h-?n-F6rrit-ene.;G 'or tc;lF. d g.*L f4:1*"":l'r tt | :t rrom ,
A lne annrng line :lhai::.va faclory. The co| f,any was granled the ) pnor lo ne,-.. .rrrii rs, \,.,ltich e)remplror s t i p ! l a l el l l . r i a l c o l l o l a n d t o b a c c ol \
'r: jl]1: _:': ir.- _r^l r i.'i:rl:. i-,. la.: . a r ;a l t . : : . .)

al lhe nev,,srte wll be t:..iica{ed solely to the produclionoi alqoholicbeer, while

The followingtable illustrates ABC'S brewingand bottlingcapacitiesfor alcoholic non-alcoholic and beer,as well as for sofl drinks;
Table 4.1: Breakdown of Capacity

Sharkeya '. Sharkeya Nile Brewery Gianaciis EIObour"

400,000 hl. 900,000hl. 6,000,000 cases hl. 300,000 535.000cases _500.000.h!.

AlcoholicBee. Non-Alcoholic Eeer noII unnks Non-Al.oholic Beer AlcoholicEeer

'ABC is clorng th'5 /acrory as sNn.s irs Gre_e,nl5er4 Obour h.!^ry6 ooeraronal, " Thrs laclory's raciry h.s rhe porenliar!_r6!-n9 nqea5ed ro r djllion hl al minimal cc6! with rhe pu.ctEse ol a -: bo(ing li.e wodh tE JE milLiori.

P r o d u c tE v o l u t i 4 n

ABC is presently thelargest beermanufacturer in Egypt, withan estimated market share snare of or more than tnan 90% uuTo tor and for alcoholic atcoholtc beer 95% 9! fof noft.alcohblic non-atcoholc beer. The > _tor pl compalyioes not e;;;A-iis=iE6hoticbeer.buffit-oes exFortaround5% of its : beer, mostly to Gulf countries. ABC'S beei sales are seaso3gl.--1. ,) fu V-non-arcoholic )uJ companyls.sales-.a-re-il.r!9_"!r11c-roqh", oe-b^L"-eofr6;i=-d. Q-qZe..of-tle. 4 "'" -n1",,.' Ar_ojE. Septemler. ABC is continuing to see hrrgegrowthin bothalcoholic and non: alcoholic beersales, withvolurnes increasing byl3.Yejod53_% resReptivelv.
:i'. .;,:::l::i . ,. , l.)i ' ABC re-launched wine in 1999.andmanagedto gain a 40olomarket Gianaclis with volir-mi;3*of 3hare. sales 123 thousand-ht. ABC'S soft dn'nk sales,. on the other hand, have not shown such an imoressive Salesvolumes havedgclined by 1O%io 3.3 mitlioa units- due to a . \ pedormance. price incieasethat the..company pri.F hike by iniplemented followina a sr-milar cocE--cdae_!d_?9p:l fg!4-!!eJw-._6--m-:tiR6fleaders. ABC's main focus, however, is penelrate iurther the beer markel. The company sees its softdrinkproduction as <-Jo genefal comp/elirg its portfolio. beverage M
TwelveMonths Ended TwelveMonthsEnded 31hZS9 3111219A Value Sles Sales SalesValue Sales (ooo (o00LE) Volume(hl) LE) Volume(hl) 345.690 Non-Alcoholic Beer Wine (volLrme in cases) Soft Orinks(volume in cases) 136.871

(zoo7oo.,
0 3.721 ,634

49f19
0 21.513

176,387 391.241 / 424,21:5)) \(81 674 ) 't4.504

3,362.633

24,626

I
BrandPortfolio I
ABC currenllv rlivprsifie.lalcoholic and/ non-alcoholic beer brand lly hrs a fflllv ly dive|siil
L

,.2 l fr

portfolio, well es ilr q.lfi.irink<.Th in addition to its rgfeD.lly-lal$qh9d-luisEs--q cornpany intends furtherbrandsto tclne',{ to expand by introducing its portfolio demand in themarket. andlo iulfiltheneeds brackel of everv eoeandincome

/----._\ portfolio Sle/fa; includes:. beer alcoholic ABc's inlg!-glhqJqass--ma(gNSle/a Expotl, inle^ded for A-C classes and Slel/a Femium, a locally-brewed,betterimportedbeers,intendedfor Aqualily lagerproduced to comoelewilh hiqh-quality,

AfcoholicBeer

a shandy almed at young most recenl addilionto its pordoliois El Do@do, The companyplans to' beer' to drinking consumersrvho are not accustomed intrbduceC;;/sbery in 2000, brewed underlitssie from carlsberg Internaiionalas well as Guinness. a dark beer, brewedunderlicense. .
I

and stellaPremium' Expott anda high:quiffi-r inai islTEloetween sle//a ABC's andtqste. ol itsapggarance because beers verslerii compaied lo German

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Beer Non-Alcoholic

beer portfolio is divided into two major categories:flavored ABC'S non-alcoholic beer. andnon-alcoholic mall beverages arc ABC'sflavoiedmall beveragesand are FavrouzApple andFavrcuz Raspberry 'rhe The company launched rnifttaas: nalural attenative l9-:94 j1[91

Fayrouz thisyear. Pineapple adier from Hurlimann' beer, brewedunder is ABC'S npl.alccholrc Biel .ligense is removedlt is the alcohol then and beer 6irel/is brewedlike fegular Srvillerlaod.
ma eteC es a kendy and heaithy alternativeto soft drinks, and is particularlv aimed at l,luslimswho like the tasre of beer, but wish to abide uy tneir(EiiE-i-nl beer, brewed under license from ABC plans to introduceKallber, a non-algoholic G-tlienes!and aimed at premium consumersas well as exportmarkets' e S' S?urli

@Ge$rges!9elsgJner-ot-non.abqhgllc-beer in the world) This is especially to 4 MENAmarkels. rights distribution asABChoids the exclusive sionificant soft drinks' than average beers25% higher its non-alcoholic: AdC ha; pricdd ol me marKet. themedium andhighsegments thereby iargeting
' Solt Drinks(CSD) Carbonaled in three flavors: ABc proiucesRc under licensefiom RoyalCrownlnternational own brands:lemonof.its two cola, orange and lemon lime. lt also produces the company We_:stD9!e--tir,at. red Y1tsiin9. ltavored Cilrino and tangerine-ila.r'o holds3% ol the market. In ordato compete effectively, particularlywith imported beverages,ABc has beer and soft drinks, in introducedmost of its products.includingits non-alcoholic perceived ifl Egypt as higigl cans as well as in bottles. Canned beveragesare quality and ABChas pricedthemaccordingly.
Figured.2:ABC's SalesVolumes Bottled and Canned

l::l::,:

v . v -i o(r,oeaux r, m amhor ^ r r . , an -^ .^,,^\ , ^- . ^:E:L.+ (a menber oi Tarllan ur rii Groug) broupl tor lor rechnrcai le;ml; technlcat suppo.l. support. I for ABC plans to In(roc introducenew thecianactis Iacrory,.
------:------:

o.tohe. 1oo9 The rnr-:^,,

*n'.m. adry red wine, :|ilx: Bil;5::""',1;:riL:ri,:::";'!)'Ll'::0,2^",. Ru-bis d'Eswte. " - ;.;;; - - ' " ilJ v i c ;?#i,:; , , , d r K e II n
2::,::f:!:'::::lj9lt^ti'lly:::d :ai F...-,:
illT
,.,",,ti-. i": ' .: r. '^ -. -"''i- '- ! ((' -( i (

;1:,,:-],:.:.";y_" the localmarketin ,:: lhe ::l future.

orABc producine ji," ourrhepossihiriry rr;; t;;;; ;;

products Non-alcoholic

inctudin-g.atcohotic anO non_"rior,oli" *,nu" ".

Table4.3:ABC's productssellingprices AlcoholicProducts StellaLocal StellaLocal(cans) Slella Export ' LE5 SlellaExport(cans) SlellaDraft(l l.) Stella Premium' StellaPremium Oraft(t t.) Meisler' LE 4.6

Meister (cans) El Do.ado-:+ OmarKhayam Rrbisd'Egypte

Crus Oes Ptolemes

Birell ' Birell t. Birell(cans) Fayrcuz Fayrcuz' Fay.ouz (cans) - .' RCCola / Orange RCCola / OEnge(cans)
ultnno Yosfino SaliWater (1.5t.)'- .SatiWater(1l.)'SafiWater(0.51.)':..

LE 0.5 L E1 . 5 LE 1.6

LE 1,6 LE 0.45

Le 2.8 LE 21 LE 20

LE0.3 LEl LE 0.85 LE 0.65

Dislribution

ii" r Ls r i"oi_"i utrecl :f ::J,,^1.:: lhe orsrnou(ron rs handled by some 50 beer agentsand 22 soft.drinkadents. The agentspaVcas.bondeIjverV2n.lFi|hAr.n||A^tth6h6t,...^^^
; :

Distribution is oi theutmost imoortance for fastgfowing consumer goods. Thishas alwaysbeen a pdodtyfor ABb as "an Oeseen frorn'its estabtis'h;;listribution system, whichcombines di.ectand indirect dist.iburion. ABaa.dr:; ' ii",ribr,ion

compfitFwarehousEi and rruckfleei,*rrir" rv,,r,=

company. Safi hords the Esyptian, bottled warermarker, 1ql6_of ::l:l ::t !!g -rfl.srow by aoout pet-a1num. The Esyptian AlInyowns ?oo/2 ll::,fl^" ^:llT"j:

a beercor Ua v. Reachhas enteredinto an exclusive disdibutiod agreement with Safi. a mrnerar

j:ign, from.offering rheccrnrnny's "eiGi :"11d tnem Derng associated with

acclunts for around 807oof beer salgsand 30% otjgl-riio}.sales__ Aou nas JU uucks and 450 warehouses, including those belongingto its new distribution company,Reach. ABC eslao shedheachas a separate entityso rhatit

or!I1!_uj9.l9__r.eiailers-and. - ::::_:je-s$ous, other rdoers, traders, oltj -_extendingolrj:ln-_ex{enotngcmCil-Erect cGdit. Direct distribution distriburion

ro oitreicomplnlus. *,rnout

jifs#srffil

100,a new projeci, nasa owedAtsC lo introduce a novetconcept lo l"ip?::l::: lne Deverage industry.home Celivery. The company has already opened13 : : l " j oer'./er :19iur : l roi :,99;catlytocatedrnprimeareasofCairoandAlexandiid.wnrcnseI ano ait ABCs products. Thecompany akcady holds ano ?anew licenses oerreves tlrarit wi haveopenedUp_sspe_rs_to.te:-bw-QeZ fneGln *iir

::::"]l^Ti:'-lu!^s sn!-ps llgl :9il ;tcoho'.all over E.\/cl

sates votunres, uut.n-ouro iGo-rourur u,u-JiJ"prnn.u or

V . F i r r a n c i aP l erfoimance
5.1: ABC'5 Income Statement ioilne ABC has released its six-monlh Slx Month Period Ended 31/i2.,99 interim financial resultsfor lhe period eoding 31/12199. The companyalso (lE o00E) releasedfinancial stalemenls for me NetSarel 129.619 160.A63 vear onrje.-l np..rnl,6, t oqo ia coGs r:..aal ac(o odnce with ils plans to change 88,753 110,114 ils llscal year to corespondwith the SG&A (41.375) 129,744' calendar yeat, thefeby allowing (43e) portlolio investors lo more easily Ne(Or{rdtingProfil ,r,oo, 68,301. - benchmark ABC to othercompanies. (2,22J1 11.5721 'iabl

F ul l . Y e a r Results 12.2151 AtsCs saies for the year ended (79?) (1.o,os) uecember 1999,show a remarkable 60.310 75.7!B improvement.The company's profit betore taxes increasedby 30% to LE 1?"8 r!1]lo!,whileovera satesincreased by 46% to LE 303 million.'

5.880

1l . i 1 8

G;ttrib-ute AFC.. increase in salesmainly to thefollowing threefaclors: ' A 14%increa6e in sale! volumes of alcohol.c beer(to-391 tt,orsunJnt; "no " 59%increase in salesVolume bf non.alcoholic beer +za tip-usanJ n1. ito ' A changein ABC'S salesmix: volumes of more expensive,'ca noed aicoholic and non-alcoholic beerincreased by moie than ZbO"Z l,fl: io ig ihousanO representing 10%of overalt beervolumes, coripareiJ to 4i" (24 tho;sandh0 i; , 1998. ' Abt sold 122 thousand casesof wine,represeoting -5Zoof the companys overall sales. A result of ABC,scomplete quality an; mbrketjnjovertraut of Gianaclis. .
Figure 5.1: ABC's 1999 Sates Breakdown
Sali

ay,

27%
.|Naoo'd'a'.a3w

ataroundg. wirh a45% increese insross lff;:,:tT",,8fff,ilfl:fiJ3il"r"0

Table5.2:ABC's cross profil MarginBreakdown
FY 95/96 38.8%
Sotl O.inls

FY 9&.97 68 t3% 37% 24.5% 5-o.3%

FY 97/98
716.!, .16.51'o 2!-.4ok 63_ 19'o

FY 1999

s2.2%
42.30/, 4 -o.39/o 65.39'.

Crcss ProntMargin

24.3")/. 58.3i,i,

order to , t h e c o m p a n ys sa t e s a n dd i s l r i b u l i o nr c e fo o n r n eo o e - i J n j .a s * e r ra s :1, : " ! ' ' -., rF-a rcl(roch . .l ci rhs clrnp.lnys ney/ prod(,{:is. cn lhc olher ABC plans ta

as oppos.d 10 38% in iiscatyear 1999. The 499i increjid i., u in i SG_&A p _ q 4 . -expense5 s^PYr rsE: --_ \ v w , , , ( ,rr- i r 1 r w e n l
o n a d v e r l i s i n qa n d d i s t r i 6 u l i o n ) ,uas made-in

abov: rnentionedsiabrlity In gross marginswas lo some extent feFtected at the ]Le q"r or-crir'lg maroin levet.whrch shows a ralio to sales of 39yoin fiscat year 1998,

V l . P r o ie c t i o n s
ABC to continue to witness growth Yu.."rp:9, overthe comino ,_o .,--..- As a mafler oF faclwe expect vorumes ro,"i;i.rr", n"i.-:^;'-,::Ililg.!v-e..ye9.s. non-"rcorioril l"Ji',und a cAGR af 1o%, winero sraw rra{et e.l_a!ae&!l: 10%. 160/^ - rsz",""f""tiu"ri ,.i]",":']:^3.::ll 16o/a a

;;ff;

:ffif;il"..%il:

,^_

, _ .^^1.-,.o

::li^:.^irj ud'e> u/1(Jr( ror the period

rn t999. we expect rhis groMhro

?000_?OA4 is 1go/o.

rug,owoy Jt/o oy ne end

i'"':,T* :::j;i:jj,i,ru,, ;"*::

200f,1 ?ooat 551

f"Ot" S.l: aeC's p;F;;;;;;;;;;;

^ r c o h o r ia c.c.{ooo,s hr.) Non.Atcohoric 6ec. {ooo,s hr_) t2.7% 34,99t rig u.o.lt -_+ 5sl 9.7t'|
81A 602

5o4 !nnks {ooo.s c.ses)

'2i!:

,1y:

20% "--> 8.2% 199

.92.,., 921
12.5Y,

a.I ro3l
122.!.

2o.or'. '00".

"7,

A!4rsd

ow.Fa-r^1'

err..<

A r c o h o r i cB c e r ( ! E . / h r . ) Grcv/it{%) Non,Atcohotic aecr(!Ahr,l Grcwlh (%)

d5l t9J t13.0 ;

502

r0.5%
210 8.6% t29.3

590 62%

6r3 :43 260 4.89'!

6.1'ri
142,8 r0.09/o 1.0

so/r ornrks ltE/c.sc)

r0,0?. 1.O

'tst-t '. : 10_0L

7.0%

ron.^rcoharicAcer
Sotl Orjnks (./tl

t%)

52.2% t2,3.4 !1.:Y,

5r,itt
.0\t"

76.0./, :o.t1,! t5.01!o

75.8ta r-e.6:/o

r9.0-r,,