Strong kick in NamBrew results

Jo-Maré Duddy – NamBrew’s jump of nearly 53% year-on-year in its profit for the six months ended 31 December 2018, and especially the performance of associate Heineken South Africa, have local analysts smiling.

The latest half-year results of locally-listed Namibia Breweries Ltd show a profit of nearly N$366.7 million – about N$126.5 million more than the same six months in 2017.

Heineken South Africa (HSA), for long a drain on NamBrew’s money barrel, reported an equity profit of nearly N$78.27 million – a massive u-turn from the equity loss of about N$13.8 million in the same half-year in 2017.

“The turnaround in the associate from losses to profit was expected, but the quantum was noteworthy at N$78.2 million,” PSG Namibia said in its first glance at the results.

“The significant profit from the associate will be welcomed by investors,” the analysts said.

IJG Securities said NamBrew’s results “surprised to the upside once again” as HSA posted a net profit for its year-end.

“This was ahead of guidance which stated that an operating profit was expected but the bottomline was expected to continue reflecting losses,” IJG commented.

“Heineken South Africa is self-funded, and this earnings surprise thus shows the extent to which HSA has been able to grow volumes in the South African market. Management also mentioned that HSA now operates the world’s largest cider plant (by volume) at Sedibeng, and that the performance of the Strongbow brand is exceeding expectations,” the analysts said.

Revenue

Revenue for the half-year under review came in at nearly N$1.64 billion, up nearly 13.8% year-on-year. Sales of goods were around N$191.9 million higher at some N$1.57 billion, while royalties and know-how fees increased by about N$6.1 million to N$64.1 million.

PSG said the larger-than-expected revenue growth was due to the South African business delivering “exceptional” results.

Commenting on the latest results, the finance director of NamBrew, Graeme Mouton, said a challenging trading environment, NBL managed to increase its overall volumes by 11.8% and its operating profit by 7.6%.

Mouton attributed the higher operating profit to cost savings and improved efficiencies included the negotiation of reduced transport fees and the implementation of an electronic management system.

“Profit attributable to shareholders of N$367 million was delivered for the six months ended 31 December 2018 – an increase of 52.8% on the prior year. This increase in mainly attributable to exceptional performance of Heineken South Africa for this period,” Mouton said.

Market

NamBrew, a subsidiary of the Ohlthaver & List (O&L) Group, maintained its strong market position despite persistent economic challenges and the effect on consumer’s disposable income, he said.

For the period under review, Namibian volumes were in line with prior year, Mouton said. Export volumes decreased by 35.1% whereas volumes produced for South Africa increased by 51.2%. HSA has been successful in gaining market share in the neighbouring country, resulting in increased volumes, the company said.

The fact that Namibian volumes remained flat possibly indicates an end to declining volumes sold domestically, IJG said.

“The launch of Tafel Radler was well received by the market and demand just about exceeded supply. Export volumes (which generally make up around 5% of volumes) dropped by 35.1%, but management indicated that timing issues were largely to blame for this and that a corresponding rebound will be seen in the second half-year in 2019,” IJG continued.

Outlook

Mouton said the consumer shift towards flavoured and low alcohol beverages continues, with a commensurate increase in demand for products such as Tafel Radler. “This trend is expected to continue,” he said.

The company said in anticipation of O&L’s 100-year celebration in the next financial year, a new vision – Vision 2025 - and a strategic cycle are being developed.

“The group will continue to focus on expanding its product portfolio, which includes the craft beer, soft drinks and non-alcoholic beverages portfolios that appeal to a wider consumer base in Namibia, South Africa and beyond,” Mouton said.

“The group expects to maintain the solid performance in Namibia despite the challenging operating environment. We will continue to invest in Namibia and support local investment through local procurement,” he said.

PSG said the drive to explore investment opportunities in promising export markets continues. “This is more optimistic than previous prospect communications.”

Namibia Breweries is listed on the Local Index of the Namibian Stock Exchange (NSX). With a total market capitalisation of N$9.397 billion, it is the second biggest company on the Local Index – surpassed on by FirstRand Namibia with a total market capitalisation of N$11.544 billion.

NamBrew closed Friday at N$45.50 per share, 15c a piece or 0.3% higher than the previous Friday.

Kassie

Results in a nutshell

· Revenue N$1.6 billion, up by 13.8%

· Operating profit N$371 million, up by 7.6%

· Profit after tax N$367 million, up by 52.7%

· EPS 177.6c, up by 52.7%

· HEPS 177.8c, up by 52.8%

· Final dividend per ordinary share 50c, up by 8.7%