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Zambian Breweries PLC Interim Results for the six months ended 30 September 2012

30 September 2012

The Board of Directors of Zambian 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.

Income Statement six months ended 30 September

  2012
K'Million
2011
K'Million
%
Change
Revenue 539,766 428,200 26
Profit from ordinary activities before exchange losses, interest and taxation 105,139 72,363 45
Operating exchange losses (10,635) (449)  
       
Operating profit 94,504 71,914 31
Finance costs (26,259) (31,168) (16)
       
Profit before tax 68,245 40,746 67
Income tax (25,932) (15,891) 63
       
Profit After Tax 42,313 24,855 70
Earnings per share (Kwacha) 95.7 63.2  

Balance sheet as at 30 September

ASSETS EMPLOYED 2012
K'Million
2011
K'Million
Property, plant and equipment 1,155,531 750,816
Current Assets 354,299 221,503
Total assets 1,509,830 972,319
EQUITY & LIABILITIES    
Shareholders' funds 683,759 261,912
Non-current liabilities 148,179 490,189
Current liabilities 677,892 220,218
Total equity and liabilities 1,509,830 972,319

Financial Review for the 6 Months to 30 September 2012

  • Volumes up 16.9% on prior year
  • Production efficiencies, distribution cost savings and overhead cost control
  • Operating profit growth of 31%
  • Excise and VAT payments grew 11% on prior year to ZMK 211 billion

Zambian Breweries Plc. recorded a strong performance for the first 6 months of the year. Profit after tax ended at ZMK42.3 billion, up 70% on the prior year. Our revenue growth of 26% over prior has been driven by a 13% growth in beer volumes, with both Mosi and Castle Lite sales performing exceptionally well. Our 24% growth in soft drinks from prior year reflected the company’s decision to reduce the cost of soft drinks to the consumer in March this year. While our beer volume capacity remained constrained, improved production efficiencies and more effective distribution planning and execution allowed us to deliver more product to the market.

Our gross margin performance reflects this volume growth, the benefit of continued distribution efficiencies and positive price variances on imported commodities and products as a result of the Kwacha appreciation in the first half of the year.

Strong focus has been placed on cost efficiency across all areas of the business which has resulted in overhead costs only growing by 18% despite the significant volume growth and normal inflationary pressures. The reported operating exchange losses related to the valuation of forward contracts taken out six months in advance in line with group policy and is a result of the appreciation of the Kwacha against major currencies in the first half of the year.

Despite this, the combined impact of strong volumes and improved cost management has yielded a 31% growth in Operating Profit. The increased cash flow generation in the current year has allowed us to pay down our syndicated facility to ZMK 290bn, yielding a ZMK 4.9bn saving in interest paid in the period.

We are pleased to report that financing commitments are in place to refinance our outstanding ZMK 290bn syndicated loan facility reflected in current liabilities, in January 2013.

Strategic Review and Prospects

Economic conditions during the first half of the year continued to be generally good. There were a number regulatory changes via the introduction or enforcement of several statutory instruments directly relevant to the business including packaging guidelines (SI 23), minimum wages (SI 46), liquor trading hours (SI 96 and SI 640) and SI 33 prohibiting the use of foreign currency as legal tender.

Much improved availability of beer drove great momentum and saw us deliver record trading months in both August and September 2012. Our new state of the art 1,000,000 HL brewery comes on line in Ndola in November. This increase in beer capacity from the current 300,000 HL brewery will provide the business with significant opportunity and will allow us to address the current short supply to the market.

The reduction in the price of our 300ml soft drink RGB that we announced in mid-March 2012 caused huge excitement and saw us start the year in buoyant fashion. This mood in the market continued throughout the period. We are pleased to report the government’s decision to remove the 10% excise duty on sparkling soft drinks and water. This will provide continued support for our decision to drop the price of soft drinks in March, 2012 with the intention of making these products more accessible to the man on the street.

With the current strong economic fundamentals and the new beer capacity coming on line, we expect to deliver strong financial results for the full financial year.

Sustainable Development

Zambian 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, Zambian Breweries Plc. and National 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. The Board of the PRO is chaired by Zambian Breweries in demonstration of the company’s resolve to address the challenges posed by it packaging on the environment.

Zambian 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 National 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. To directly engage the youths on the issue of underage drinking, Zambian Breweries sponsored the Teen Vision Trust conference and made presentations to encourage pupils not to drink if below the statutory legal drinking age, which is 18 years in Zambia.

Our barley program continues to be a great success. The Company is self sufficient using only locally produced barley and has excess barley from the current crop for export. This program has substantial benefits to the farming and agro processing industries in the region. Substantial formal employment has been created. Zambian Breweries is committed to reducing energy and water usage at both the Lusaka and Ndola plants so as to ensure that any development is made on a sustainable basis. The six month period has seen steady progress in both areas at both plants. Ongoing focus will reap further rewards in the future.

Download the full Half Year announcement PDF 0.25Mb

Copies of the press release are available from the registered office:

Zambian Breweries Plc.
P O Box 31293
Plot No 6438 Mungwi Rd
LUSAKA


Enquiries:
   
Luke Njovu Corporate Affairs Director Tel: +260 211 246553/ 244180/244158
e-mail: info.zambrew@zm.sabmiller.com

By order of the board

Mwansa Mulumba- Mutimushi
Company Secretary
20 November 2012

Interim Dividend

At a Board Meeting held on 7 November 2012, the Board resolved not to recommend an interim dividend payment for the half year ended 30 September 2012, to allow the company to continue to reduce its interest bearing debt and interest charges. The significant debt is a result of the ZMK1 210 billion capital expenditure investment over the last five years.

By order of the board

Mwansa Mulumba- Mutimushi
Company Secretary
7th November 2012

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