INTERIM FINANCIAL RESULTS
The Directors of National Breweries PLC (“Natbrew” or “the Company”) present the interim unaudited financial results for the period ended 30th September 2022.
COMMENTARY FOR THE PERIOD ENDED 30 SEPTEMBER 2022
Overview
The Company commenced implementation of its turnaround strategy at the beginning of 2022 following the relaxation of COVID-19 public health protocols which permitted longer trading hours and increased opportunities to activate our expanded product offerings. However, an increase in product prices following the upward adjustment of excise duty on opaque beer initially dented these initiatives. Nonetheless the Company expanded its depot footprint in strategic areas around the country and deployed its new packs to grow its market share of Traditional African Beer which remains very competitive.
• After a weak first quarter, volumes recovered in the second quarter resulting in the first half volume remaining flat compared to prior year.
• The affordable offerings contributed the larger sales volumes during the half, but increased acceptance of the mainstream products provided an opportunity to recover profitable volume.
• Chibuku Super performance was hampered by an initial resistance to an upward price adjustment and a strengthening Kwacha exchange rate which negatively affected uptake in some markets. However, the Company has mitigated this by exporting to Zimbabwe with the support of the parent company.
• Excise duty, which rose from 15 Ngwee per litre to 25 Ngwee per litre at the beginning of 2022, impacted negatively the Company’s net revenues and margins.
• Disruptions to the global oil supplies, which saw petroleum products increase in price, resulted in higher distribution costs.
• Production costs did benefit from the strengthening of the Kwacha as well as decelerating annual inflation.
The Company posted an operating loss of K81.6m during the period against a loss of K67m in the prior year. This resulted in a loss after tax of K54.5m (2021: K12.5m) and loss per share of K0.86 (2021 : K0.20) on account of higher finance costs and lower exchange gains on foreign currency denominated liabilities.
Corporate Governance
National Breweries Plc. remains committed to regulatory compliance with a strict corporate governance culture. The Company achieved nil breaches of corporate governance and anti-bribery codes in the period under review.
Prospects
• The expansion of the distribution footprint and improvement of customer service, as well as exports into Zimbabwe have set a strong foundation for improved volume growth going forward.
• The Company is focused on increasing the volume performance of both mainstream and Chibuku Super offerings to deliver value for the business whilst the affordable category, targeted at the lower end of the market, will enhance volume and efficiencies.
• Development of local suppliers for reduced costs and lead times of supplies will be a key lever to improving margins during second half.
• New product innovations are anticipated to be launched during the second half to increase excitement and appeal of the category to an increased base of future consumers.
