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Zambian Breweries Plc - Interim Results 2007

13 November 2007

The Directors of Zambian Breweries PLC have pleasure in announcing the unaudited consolidated results of the operations of the company and its wholly-owned subsidiaries for the 6 month period ended 30 September 2007:

All figures are stated in Zambian Kwacha Millions:

  6 months to 30 September 2007 6 months to 30 September 2007 % change
       
Gross turnover 362,889 296,198 22.52%
Discount 1,445 1,481 -2.43%
Value Added Tax on Sales 68,481 56,445 21.32%
Excise 83,083 62,125 33.74%
Net turnover 209,880 176,147 19.15%
Profit before interest and tax 34,669 29,902 15.94%
Profit before taxation 31,189 25,906 20.39%
Taxation 12,291 9,720 26.45%
Profit after taxation 18,898 16,186 16.76%
       
       
Number of shares in issue at period end 364,000,000 364,000,000  
Earnings Per Share (Kwacha) 51.92 44.47 16.75%
Interim Dividend Per Share (Kwacha) 36.00 31.00 16.13%

Financial Performance

The first half of the 2007/08 financial year saw strong growth of nearly 10% in sales volumes of sparkling beverages. This growth could have been stronger still had it not been for a shortage of empty bottles which, in turn, was caused by a regional shortage of glass production capacity. Clear beer sales volumes however, were almost exactly the same as in the first half of 2006/07. This lack of growth was largely the result of a price increase in February 2007 which was necessitated by an unexpected increase in excise from 70% to 75%, making Zambia the highest excise regime in Southern Africa. The high rates of excise make the Zambian beer market vulnerable to attack from illegal alcoholic beverages in one form or another. The prevalence of low-priced spirits in plastic sachets and of cheap clear beer brought in from neighbouring countries, is evidence that this vulnerability is being exploited.

The effect of the beer excise increase comes through strongly in the above results with excise increasing by nearly 34% on gross turnover which increased by a much lower percentage of 23%. Despite this however, the Group managed an impressive 19% increase in net turnover on the back of growth in volumes, a sales mix which moved towards the premium brands, and some price increases.

Good cost control allowed most of the increase in net turnover to flow to the bottom line with Profit Before Interest and Tax increasing by nearly 16%, whilst strong cash flows coupled with good treasury management kept interest charges lower than prior year and ensured that Profit Before Tax increased by more than 20%.

Dividends

In line with the company’s dividend policy, an interim dividend of K36 per share will be recommended, which is an increase of more than 16% over last year’s interim dividend.

Prospects for the period ahead:

The current economic climate of high GDP growth, a strong currency, low inflation and low interest rates, looks likely to continue for the foreseeable future, and is predicted to lead to  continued volume growth and a further shift towards premium brands and packs. At the same time, further product innovations and launches, combined with continual improvements in the group’s production, selling, distribution and marketing capabilities will ensure that the group remains in good financial and operational shape.

By order of the Board
E C Sekele

Company Secretary
5 November 2007

Zambian Breweries Plc
Interim Dividend

At a Board Meeting held on 6 November 2007, the Board of Directors proposed an interim dividend of K36 per share for the 6 months period ended 30 September 2007.

In accordance with the requirements of the Securities and Exchange Act (Act No. 38 of 1993), notice is hereby given that the dividend shall be payable to shareholders registered in the company’s books at close of business on 30 November 2007.

By order of the Board
E C Sekele

Company Secretary
6 November 2007

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