E-Malt.com News article: 3337

Namibia-listed Namibian Breweries Limited has announced a rise in its headline earnings per share (HEPS) to 18.8 Namibian cents for the 17 months to end-June 2004 from 11 cents for the 12 months to end-January 2003, Business Day, South Africa revealed on September 28. The brewer declared a total dividend for the year of 22 Namibian cents, comprising a 5.5 cents ordinary dividend and a 16.5 cents special dividend, which it decided to pay as a once-off given the group's strong sash situation to optimise its level of gearing and improve return on shareholders equity.

Nambrew, which counts among its brands the well-known Windhoek and Windhoek Light beers, and distributes the Heineken beer brand in South Africa, changed its year-end to June from January during the period - therefore the two periods are not comparable. During the period, partly in response to rising pressure in its key southern African markets from competitor SABMiller (SAB), Nambrew teamed up with brewing giant Heineken and global drinks group Diageo to create a new joint venture called Brandhouse, which will jointly market and sell a wide portfolio of alcoholic beverages.

Total revenue for the 17 months rose to N$1.29 billion from N$878.9 million in the earlier period, while operating profit fell 48% to N$36.8 million from N$70.5 million. After depreciation, tax and finance costs, the net profit attributable to ordinary shareholders stood at N$40.2 million, compared to N$23 million previously, with the increase due to a much lower effective tax rate.

The group's operating margin deteriorated from 8% for the previous period to only 2.9%, which was partly attributable to the periods being compared - beer sales are seasonal, with the 17-month reporting period spanning two low seasons. The decline in profits was also attributable to flat growth in the domestic Namibian beer market over the period, the group said.

Nambrew's volumes in Namibia, especially in the first months of 2004, declined due to tough trading conditions. In addition, the enforcement of the new Liquor Act had had an effect on trading activities. However, an extensive marketing drive had taken place to support the group's brand plans.

In the South African market, although sales volumes rose, they did so below the overall growth of the premium beer category in which its Windhoek brand competed. This was due to the intense competition in this market segment, arising from the introduction of several new beer brands from competitors, and in response Nambrew had made an additional marketing investment ahead of volume growth to support Windhoek lager.

Cash generated from operations was steady at N$87.5 million from N$88.6 million, while net cash flow from operating activities was reported at N$47.2 million versus N$51.3 million. There was a net increase in cash and cash equivalents of N$15.8 million, compared to a decrease of N$13.2 million in the previous period.

Of its total revenue of N$1.29 billion, Nambrew earned N$1.08 billion from beer, up from only N$645.8 million previously, and N$156.5 million from its soft drinks business, compared to N$200 million for the 12 months to end- January 2003. Other income stood at N$55.8 million, up from N$33.1 million.

Namibia-based revenue totalled N$521.4 million, from N$372.7 million previously, and revenue generated from exports improved to N$769.8 million from N$506.3 million. This was despite the stronger exchange rate of the Namibian dollar against other currencies (apart from the rand), although the stronger Namibian dollar did put pressure on the group's export margins.

At the same time, the expected execution of the bilateral agreement with Angola, to allow the easier import of Nambrew's products into that country, had not yet occurred, with cross-border logistics and requirements imposed by the Angolan government not yet resolved. Nambrew cautioned that, even with the bilateral agreement in place, recovery of its volumes into Angola would be a gradual process.

The brewer also noted that operating expenses for the period contained many one-off costs related to the set up of the Brandhouse JV, management restructuring and business process re-engineering, and information systems upgrades. Additional expenses had been incurred to support the marketing efforts for Windhoek and Tafel Lager.

Looking ahead, Nambrew said the past period had marked major change at the company, resulting from its new partnership with Heineken and Diageo in South Africa, as well as management restructuring, the establishment of the Heineken brewing facility in Namibia and further improvements in its brewing and bottling processes. As a result, it was now confident that the foundation had been laid for regaining market share domestically, as well as increasing growth in South Africa and other export markets. This, it said, would contribute to sustainable profit growth in the medium- to long-term.


29 September, 2004