No Covid hangover for NamBrew

Jo-Maré Duddy – Locally-listed Namibia Breweries reported a total operating profit of about N$612.6 million for the year ended 30 June 2021, the third largest in the company’s history.

Compared to its 2020 book-year, NamBrew’s operating profit increased by nearly N$159.4 million or 35.2%. NBL’s operating profit was only bigger in its 2018 and 2019 financial years, Cirrus Capital commented the company’s latest results.

The operating profit margin of 28.8% is the highest in Cirrus’ available time series.

“Management stated that the largest contributor to the improved margin was the product mix sold during the year. Further management comments were that some operating expense savings were not normal and thus the high margins cannot be expected to be maintained in future,” the analysts said on Friday.

IJG Securities noted that operating costs fell by 7.1% year-on-year (y/y), well below inflation of 4.1% over the same period.

“This is mostly due to raw material costs falling by 22% y/y and repairs and maintenance costs declining by 36.5% y/y. The results release notes that several capital expenditure projects were delayed and repairs and improvements were handled locally due to travel restrictions preventing international contractors traveling to Namibia,” IJG said.

NamBrew reported a total comprehensive income for the year attributable to equity holders of the parent of around N$377.98 million, up 43.4% y/y.

HEINEKEN SA

NamBrew’s total equity loss from Heineken SA (HSA) for the past financial year amounted to N$73.5 million compared to N$76.7 million in the 2020 book-year.

HSA experienced further trade restrictions during the reporting period, which impacted volumes as well as royalties and resulted in a revenue decrease for NBL of 18.5% to N$1.386 billion, NamBrew said.

The associate reported a loss of N$89.6 million in the first half of the 2021 financial year and a profit of N$16.2 million in the final half. According to Cirrus, this was the fourth six-monthly profit of the associate and the first since December 2019.

Subsequent to year end, Heineken N.V. made an offer to acquire NBL’s 25% shareholding in Heineken South Africa Proprietary Limited. “Discussions are still ongoing and several aspects still need to be considered,” NamBrew said.

TRANSACTION

The potential transaction is subject to several conditions, one of which relates to NBL not making any distributions, including a dividend declaration to its shareholders in respect of the financial year ended 30 June 2021.

In light of this, the board has taken a decision not to declare a final dividend for the financial year ended 30 June 2021. In the event that discussions regarding the potential transaction are terminated, the NBL’s board intends to declare a final dividend in respect of the 2021 financial year, the group said.

NamBrew paid an interim dividend during May 2021 amounting to 56c per share, representing a 5.7% increase compared to the prior year interim dividend.

The non-payment of the dividend by the holding company linked to a potential transaction in the associate is not ideal, Cirrus said.

“The potential disposal of the associate will increase profits given the (historically) loss-making nature of HSA. However, it seems that Heineken N.V. is focussing on Africa and thus one can expect improvement from the associate in future,” the analysts added.

VOLUMES

Beer volumes in 2021 increased by 13% against 2020 while almost matching 2019 volumes.

“Our Windhoek Draught brand has shown exceptional growth within our mainstream beer category taking the top position in NBL’s brand portfolio during 2021,” said NamBrew managing director, Marco Wenk.

“Unfortunately, Covid-19 related alcohol bans and trade restrictions in South Africa (SA), adversely impacted NBL’s overall volume and profitability performance mainly due to significantly lower volumes sent to South Africa. Although Covid-19 did impact our export markets, favourable exchange rates allowed us to absorb this impact,” Wenk said.

OUTLOOK

NamBrew expects steady performance for its core portfolio in its 2022 financial year, anchored by Windhoek and Tafel branded beers.

“NBL will continue to focus on further growing existing brands while also innovating into new and exciting liquids based on consumer preferences and demand. Trade execution and relationships, route-to-market and operational efficiencies will receive significant focus while we continue to support and adhere to all regulations and directives to reduce the spread of the Covid-19 virus,” Wenk said.

He continued: “We expect our South African performance to stabilise and return to normality once trade restrictions have been reasonably lifted. Although trading conditions will continue to impact our business in F22, NBL continues to be resilient and we remain committed to finding every growth opportunity possible while appreciating our role as an industry leader towards responsible and safe behaviour.”