NamBrew reports six-pack results

Jo-Maré Duddy – Locally-listed Namibia Breweries (NBL) on Friday reported a profit of nearly N$539.9 million for the 12 months ended 30 June 2022, its biggest since the beer giant’s 2019 financial year.

“NBL recovered from a difficult first half of the financial year to cross the finish line in great form,” NamBrew’s managing director, Marco Wenk, commented on the results in the group’s Intergrated Annual Report (IAR). Compared to the 2021 book-year, NBL’s profit jumped by nearly 43% or N$161.8 million.

In its initial thoughts on NamBrew’s latest financials, Cirrus Namibia said the group “performed well”.

According to Cirrus, NBL’s operating profit of N$667.4 million – up 8.9% year-on-year (y/y) - is the highest operating profit in their available time series, which dates back to 2004.

The analysts pointed out that NamBrew’s net revenue almost returned to that of 2019, with revenue in the last six months of the group’s past financial year “having its highest percentage contribution to full-year since 2013”.

NamBrew’s net revenue for its 2022 financial year came in at about N$3.021 billion, compared to nearly N$3.098 billion in 2019.

“NBL’s financial results exceeded all expectations in a difficult year,” NamBrew chairperson Sven Thieme said in the IAR. The year was characterised by three Covid-19 waves followed by a tenuous rebound in the Namibian economy.

According to Wenk: “What made this turnaround remarkable was the fact that supply chain disruptions became even more pronounced with Russia’s invasion of Ukraine, and inflation started spiking.”

BOTTOM LINE

Volume increases had a direct positive impact on NamBrew’s bottom line, Wenk said.

“With overall volumes increasing by 12%, operating profit jumped by 8.9% to N$667 million this year. This is on top of a 35% increase last year compared to 2020.”

Exports to South Africa increased by 60% and export volumes by 17%.

“The excellent performance of the South African market resulted in a 35% increase in royalty income from Heineken SA, while the equity loss from associate of N$73 million last year turned into a profit contribution of N$54 million,” he said.

According to him, NBL is in “a strong cash position” as the group has not been paying dividends due to the pending outcome of the Heineken transaction and related conditions in terms of dividends.

Net cash flow from operating activities decreased to N$436 million (2021: N$542 million). Net cash outflow from investing activities of N$102 million was higher than N$98 million in 2021, Wenk said.

Capital expenditure amounted to N$139.3 million (2021: N$137.7 million) as previously delayed projects started coming on stream, he added.

HEINEKEN

NBL management is confident that its Heineken transaction will be finalised by the last quarter of this year at the latest.

In terms of the transaction, Heineken N.V. will acquire 50.01% of Ohlthaver & List’s shares in NBL Investment Holdings (NBLIH) in a multibillion-dollar transaction. The Dutch beer giant already owns 49.99% of NBLIH.

Heineken N.V. will become the sole shareholder of NBLIH, which owns 59.4% of NamBrew’s shares on the Local Index of the Namibian Stock Exchange (NSX).

The deal also includes an offer from Heineken N.V. to acquire NamBrew’s 25% shareholding in Heineken SA (HSA).

According to Cirrus, the competition authorities in Angola, Botswana, Namibia, and Nigeria have approved the transaction. The Competition Commission of South Africa has recommended approval of the transaction, currently awaiting Competition Tribunal approval.

DIVIDENDS, LISTING

NBL declared no dividends for its 2022 book-year as the Heineken transaction is ongoing.

Cirrus said although the Heineken transaction is not finalised, “the special dividend and potential future dividends (given the build-up of cash) make the company attractive”.

Commenting on the deal, Simonis Storm (SS) in its initial thoughts on NamBrew latest financials said: “The prospect for a special dividend of N$26.35 is becoming more tangible by the day.”

Regarding the possible impact of the Heineken deal on NamBrew’s listing on the NSX, SS said: “Another sober thought is that of ‘delisting’. Although not shot down entirely, management do not see it happening anytime soon.”

NamBrew currently is the biggest company on the Local Index of the NSX by far.

On Friday, the group had a total market capitalisation of N$8.775 billion, of which N$4.388 billion was a market capitalisation by shares in free float.

‘CRITICAL JUNCTURE’

Commenting on the Heineken transaction in the IAR, Thieme said NamBrew has reached a “critical juncture in the history of NBL and its rich heritage of 102 years”.

“The opportunity has come to write the next chapter and accelerate creating the future we desire for our children, their children, and the generations to come by unleashing the unlimited potential of NBL and letting it out of its nest to spread its wings and rightfully earn its deserved space in the global arena,” Thieme said.

NamBrew is confident “that the transaction will unlock unprecedented opportunities, synergies, and scale to the business and its people, its brands, our country and the region as a whole”, he added.

According to Wenk, the deal will provide NBL with access to a multi-category portfolio of brands within the Namibian market while creating the opportunity to grow existing brands such as Windhoek beyond Namibia’s borders.

NBL will be Heineken’s exclusive partner for the production and distribution of a portfolio of alcoholic beverage brands in Namibia.

On completion of the transaction NBL will also distribute wines, flavoured alcoholic beverages and spirits as we gain access to Distell’s brands. These include, but are not limited to, Tassenberg, 4th Street, Castello, Savanna, Hunters and Richelieu.

‘SIGNIFICANT OPPORTUNITIES’

The Heineken transaction will also allow NamBrew to use its available production capacity and infrastructure to achieve higher economies of scale and efficiency, leading to improved profitability.

It will create a platform that combines the export businesses of NBL, Heineken South Africa and Distell, giving it a highly competitive scale and reach.

“Becoming part of Heineken, the second-largest brewer in the world, will allow us to better compete with other global players within and beyond our borders while creating significant opportunities for our core brands like Windhoek in Africa and beyond.

“Seeing our iconic Windhoek Lager brand being consumed in the rest of the world is a source of pride to any Namibian,” Wenk said.

NamBrew on Friday closed at N$42.49 per share on the NSX.