NBL: Heineken hangover cured

Jo-Maré Duddy – NamBrew’s latest year results froth with good news: Besides profit before taxation exceeding N$1 billion, beer volumes locally picked up for the first time in three years, while volumes in South Africa grew by nearly 45%.

Better still: It seems like Namibia Breweries’ days of crying in its beer because of Heineken South Africa – its joint venture with global giant Heineken – is something of the past. For the year ended 30 June 2019, NamBrew’s equity profit from Heineken SA came in at about N$450.5 million, a turnaround from a loss of around N$33.4 million the previous book-year.

Heineken SA was born in 2015 after Diageo withdrew from its troubled joint venture with Heineken and NamBrew called DHN Drinks. As a result, Heineken increased its stake from 42.25% to 75%, while Namibia Breweries Ltd (NBL) upped its stake from 15.5% to 25%. NamBrew also acquired the 25% stake that Diageo owned in the Sedibeng brewery in Johannesburg, while Heineken retained its existing 75% stake in Sedibeng.

For years, NamBrew helped to pick up the tab of DHN Drinks’ poor performance. Afterwards, the heavyweight on the Local Index of the Namibian Stock Exchange (NSX) had to foot its share of the bill for Heineken SA’s losses.

‘Commendable’

Commenting on NamBrew’s latest results, PSG Namibia said the “significant profit contribution by Heineken SA was multiples of our expectations (N$450 million versus N$20 million forecast).”

Cirrus Capital said although a large portion of the equity profit of associate came from a deferred tax asset, “the N$149.3 million turnaround in ongoing operations is commendable”.

“Equity accounted profit from ongoing operations was N$115.9 million for FY19 while a deferred tax asset of N$334.7 million was also realised. Although this non-cash flow item made up the bulk of the equity profit from associate, there are still positive cashflow implications as tax charges on profit generated will be diminished,” Cirrus said.

According to Cirrus, capacity at the Sedibeng brewery will be increased by 25% on the back of an investment of 65 million euro.

“The brewer intends to reach an annual output of 7 million hectolitres and has plans on branching out to Zambia and Malawi,” Cirrus said.

Heineken SA has now managed to capture around 18% of the South African market share and will be a key contributor to any growth for NamBrew going forward, Cirrus added.

Figures

NamBrew recorded sales of about N$2.98 billion in its 2019 book-year, an increase of nearly N$394 million or 15.2%. Royalties and know-how fees rose by nearly 16% to around N$119.8 million. Total revenue was nearly N$3.1 billion, about N$410 million or 15.3% more than 2018.

“For the first time in three years, volumes in Namibia started picking up again, delivering 3.9% growth on 2018 against a recessionary backdrop. Volume growth to South Africa reached a stellar 44.8%. Export volumes decreased by 31.2%. Overall volumes increased by 13.8%,” said NamBrew’s finance director, Waldemar von Lieres.

Profit attributable to shareholders of N$932 million was delivered – an increase of 134% on 2018.

Basic earnings per share (EPS) of 450.8c were reported, an increase of 134% compared to 2018. Headline earnings per share (HEPS) – a benchmark for profitability – rose by nearly 132% to 450.7c.

NamBrew’s board declared a final dividend of 50c per share, which represents an increase of 8.7% from the previous period and approved an additional special dividend of 121.05 cents per share.

Commenting on the results, NamBrew’s managing director, Marco Wenk, said: “Whilst NBL has seen significant growth over the past years, Namibia is without a doubt facing challenging economic conditions.

“These will require that we take all measures necessary to ensure we place maximum focus on efficiencies and an ongoing sustainable business. We also have to continuously challenge ourselves to innovate and find opportunities for growth, within as well as outside our borders,” Wenk said.