National Breweries PLC Interim Results for the six months ended 30 September 2012
30 September 2012
The Board of Directors of National Breweries PLC, in compliance with the requirements of the Securities Act No.38 of 1993 and the Listing Requirements of the Lusaka Stock Exchange is pleased to announce the unaudited results of the company for the six months ended 30 September 2012.
For the six months ended 30 September
|Profit from ordinary activities before exchange losses, interest and taxation||26,462||34,229||-23|
|Operating exchange losses||(3,392)||0|
|Profit before tax||23,335||33,960||-31|
|Profit After Tax||14,689||22,074||-33|
|Earnings per share (Kwacha)||K233.2||K350.38||-|
Balance sheet as at 30 September
|Property, plant and equipment||56,343||33,213|
|EQUITY & LIABILITIES|
|Total equity and liabilities||121,866||97,266|
Financial Review for the 6 Months to 30 September 2012
- Chibuku 1 ltr carton price reduced by ZMK 500 from the prior period
- Volumes up 44% on prior year
- Increase in cost of key commodities - maize and cartons
- Operating profit decline of 33% on prior year
- Excise payments grew 43% on prior year to ZMK 17.9bn as a result of volume growth
National Breweries Plc. recorded a profit after tax of ZMK14.7bn for the period, 33% down on prior year. The business continues to operate in a highly competitive market. Volume performance for Chibuku is 44% above prior year driven by the price roll back of packed Chibuku in November 2011, the improvement in economic conditions and the impact of the Statutory Instrument 23 that banned bulk Chibuku and alcohol sachets sales.
Revenue has increased by 35% reflecting the net impact of the volume increase, the price down and the improved mix towards packed beer from bulk beer. The decrease in gross margin on prior year, despite significant volume growth reflects the reduced gross margin of the packed beer as a result of the price roll back and the increased price of maize and cartons on prior year.
The reasonable 10% growth on overhead costs over prior year, primarily driven by pay costs and maintenance, places further pressure on the margins. In addition to this, in line with Group policy, National Breweries was hedged six months in advance on US$ expenses. These forwards have yielded operating losses of ZMK3.4bn to date as a result of the appreciation of the Kwacha in the first half. Some of these losses are expected to unwind in the second half of the year.
Operating profit ended at ZMK23bn for the 6 months, 33% below prior year.
On a positive note, the Kitwe Chibuku Super line was successfully commissioned just after the half year end with strong demand coming through almost immediately. This involved a ZMK25bn capital investment in installing a packaging line for our Chibuku in PET bottles. Our focus in the second half of the year will be on increasing production and sales volumes of this higher margin product. The profit margin in this business will however remain under pressure in the second half as a result of higher than expected maize prices.
Strategic Review and Prospects
The first half of this financial year saw the Chibuku business License to Trade highly threatened by the many Statutory Instruments that were enacted and actively enforced by the local government and municipalities across the country. The issues that arose were resolved through the proactive dialogue we engaged in with the various municipalities and other stakeholders. The most significant were the changes to the Opaque Laws and Regulations that had an impact on the business during the period under review. In April, 2012, the sale of bulk opaque beer and any form of opaque sold in plastic packaging was prohibited. The said prohibition involved various categories which forms 23% of our pack mix. The impact was so significant, that we had to change our focus and energies to maintain budgeted volumes as well as satisfy consumer needs.
Chibuku sales performance during the first two quarters continued to be strong despite the restrictions; such that we recorded a 44% growth versus the prior year, Carton packed beer market share for the period recorded a steady increase resulting in the the highest market share in three years for National Breweries.
The main driver of growth remained our fixing of the price point of our Shake Shake carton combined with re focusing all our resources to convert bulk drinkers to packed beer. Chibuku Super continued its momentum with the pilot plant reaching peak capacity in Q1. The launch of our new Super PET line in Kitwe will increase our sales in the second half.
National Breweries Plc. believes that the sustainability of its business is premised on it being a good 'corporate citizen', which has a well-articulated corporate social investment programme imbedded in its strategic plan. The company has therefore continued to implement the SABMiller Ten Priorities One Future Sustainable Development Plan that is aimed at aligning the company's objectives with societal aspirations for equitable wealth creation and sustainable development by supporting programmes and activities that stimulate economic and social development targeted at reducing poverty in the communities in which we operate.
Taking a leading role in waste management issues, National Breweries Plc. and Zambian Breweries Plc. led the industry in incorporating The Producer Responsibility Organisation (PRO) into a registered limited liability company that is intended to coordinate the efforts of all waste generating industries in implementing environmentally friendly waste management initiative.
National Breweries Plc. continues to be concerned about alcohol abuse and has consequently put in place programmes that are focused at reducing underage drinking and harmful alcohol consumption through initiatives aimed at self-regulation of marketing and at drink driving. We partnered with Zambian Breweries Plc. in conducting training for over 500 members of the Zambia Liquor Traders Association on topics covering underage drinking, selling to visibly intoxicated consumers and alcohol abuse.
The company has continued to be a good 'Corporate Citizen' donating to worthy causes in society both materially and financially to Chawama Cheshire Homes for the aged and Kalingalinga Hospice to mention a few. In partnership with its sister company Zambian Breweries, National Breweries rehabilitated 3 boreholes to provide clean drinking water to over 2500 people in the Palabana area.
Copies of the press release are available from the registered office:
National Breweries Plc.
P O Box 31293
Plot No 6438 Mungwi Rd
|Luke Njovu||Corporate Affairs Director||
Tel: +260 211 246553/ 244180/244158
By order of the board
Mwansa M. Mutimushi
20 November 2012
At a Board Meeting held on 7th November 2012, the Board resolved not to recommend an interim dividend payment for the half year ended 30 September 2012. Given the operating results for the period and the significant capital expenditure incurred on the Chibuku Super PET line, the Board agreed to wait until after the full year's financial performance was announced before deciding on the dividend policy for the year.
By order of the board
M M Mutimushi
7th November 2012