Namibia Breweries Limited (NBL) continued to show resilience in a highly-subdued economy, with half-year revenue increasing by 20.6% to N$2.4 billion. This is despite several headwinds consisting of significantly reduced consumer spending on the back of rising prices for basic goods and services, higher interest rates, a 6.9% increase in inflation, as well as the 22% increase in fuel prices.
“Under current conditions, consumers remain mindful about what they spend their money on, while continuing to switch between beverage categories,” said NBL’s Managing Director (MD) Marco Wenk last Friday while announcing the annual results.
He said the company experienced significant cost pressures, which included a 25% increase in the cost of glass, and a 34% increase in the cost of malt. Combined with higher advertising and promotional spending, this resulted in a 0.3% increase in operating profit to N$359 million.
An excellent sales performance from South Africa supported fixed cost absorption and a 29.9% increase in royalties, the latter amounting to N$92 million for the six months.
“Debtor days remained in a healthy range. Some payment delays in export markets impacted the rate of sales. NBL remains in a strong cash position, given that dividend payments have been temporarily suspended under the conditions of, and up to the conclusion of the Heineken transaction,” added Wenk.
As part of the Heineken transaction, the special dividend payment of N$26.35 will be paid to shareholders when the disposal of the investment in Heineken SA becomes unconditional. NBL received dispensation from the local stock exchange to publish conditional dividend declaration data in anticipation of the disposal becoming unconditional. A finalisation announcement is expected once the outstanding Conditions Precedent to the disposal have been fulfilled or, if applicable, waived and the disposal has become unconditional. Subject to the disposal becoming unconditional, holders of ordinary shares will be entitled to the Special Dividend, with the Last day to Trade being 30 March 2023, and the payment date being 14 April 2023.
Moreover, overall volumes increased by 8.7% on the back of an excellent 48.9% increase in exports to South Africa. Export volumes to other markets decreased by 44.4%, but NBL noted the revenue contribution from these markets benefited from favourable exchange rates.
Meanwhile, distributors in export markets also experienced economic pressure, while some of the anticipated revenue opportunities from recently-entered markets did not gain traction as expected.
Lower consumer spending, cross-category consumption and a price increase in October resulted in pressure on volumes, which was mitigated through one of NBL’s most successful national consumer promotional campaigns to date. With more than 2.5 million entries over the festive season, Windhoek Draught had a wide reach and strong consumer engagement to counteract competing brand tactics as well as categories beyond beer.
“Windhoek Draught pushed ahead as Namibia’s leading beer brand, outperforming other NBL brands in volume growth. It was also the star performer in South Africa, positioned as a premium brand. Strongbow and AquaSplash performed well over the six months, contributing to positive volume growth,” continued the NBL MD.
NBL Finance Director Waldemar von Lieres stated: “NBL’s performance for the first half of the 2023 financial year showed a slight improvement of the comparative period, despite an extremely challenging business environment. Beer volumes in Namibia declined on the back of tough economic conditions, with consumers spending less of their disposable income on discretionary spend. Overall margins’ percentages were lower due to the significant increase in South African volumes, which affected the mix of products sold. Heineken South Africa volumes returned to pre-COVID levels, which supported fixed cost absorption and a 29.9% increase in royalty income for the period”.