COMPETITION from SABMiller, which has set up a beer plant at Okahandja, is one of the factors that is likely to affect beer volumes produced by Namibia Breweries Limited in future, IJG Securities said in a post-mortem of the local brewer, released on Friday.
“We currently have a hold recommendation on Namibia Breweries Limited, and looking forward, we remain concerned about the increased competition in the local market to drive margin compression and sales-volume reductions for the business,” the firm said.
IJG said expected water shortages in Windhoek remain a risk, while increased leverage from the Sedibeng transaction in South Africa is another risk.
“Nevertheless, we believe the transaction to be beneficial to the company as a whole, pending further information,” it said.
With the impending water crisis in the central areas of the country and the possibility of water restrictions, the NBL has drilled four boreholes, with a fifth borehole being drilled at the moment. The company aims to be 70% to 80% self- sufficient by the end of this year.
Currently, 4,4 litres of water are used to produce one litre of beer, which is down from 4,8lts before implementing the water savings initiatives. The ratio is expected to decrease further to 3,4 litres once the reclamation plant is completed.
Together with the water savings plan, the company has a volume migration plan in place to move more production volumes to the Sedibeng Brewery in South Africa, if faced with a water crisis.
The financial results released last week for the year ended 30 June showed that turnover was N$2,4 billion, down by 0,3%. Operating profit reached N$ 541 million, up by 6,7%.
Namibia Breweries explained that profit after tax increased by 43,8%, mainly due to the deferred tax write-back in the current year. Profit after tax reached N$372 million from N$258 million last year.
A final dividend per ordinary share of 40 cents was declared.
“These results were achieved despite continued macroeconomic challenges, volume migration to South Africa and exchange rate impacts,” said Namibia Breweries managing director, Wessie van der Westhuizen.
Namibian beer volumes continue to grow and increased by 8%n compared to the previous period, driven predominantly by Tafel Lager sales.
In addition, the barley project is expected to create an additional 2 500 job opportunities over a 10-year period – a major contributor to the group’s vision of creating 4 000 additional job opportunities by 2019.
“The Namibian beer market continues to grow and strengthen our leading competitive position, resulting in an increase of 8% from the previous year. We continuously increase our support to local procurement partners to further develop the Namibian economy and mitigate foreign exchange exposure. In light of that, we have achieved a local spend figure of 38% during the current year,” said finance director, Graeme Mouton.
On 1 December 2015, Namibia Breweries acquired 25% of the issued share capital of Sedibeng Brewing, and an additional 9,5% of the issued share capital of DHN Drinks, which is now called Heineken South Africa. With effect from 31 December 2015, Heineken South Africa Limited acquired the assets and operations of Sedibeng Brewery Limited.
