NATIONAL BREWERIES POISED FOR EXPANSION

National Breweries holds shareholder AGM

Lusaka, Zambia – Chibuku manufacturer National Breweries Plc is poised for expansion following the commissioning last year of its new state-of-the-art production plant in Lusaka, shareholders were told during the company’s annual general meeting (AGM) today (July 1).

This financial year ending Mach 31, 2015, saw the company stepping up focus and investment on improving efficiencies, product quality and capability enhancement. This was demonstrated through the construction and installation of a state-of-the -art new brewery and packaging lines in Lusaka at a cost of K200 million, explained finance director Herman Lubbe.

Commercial production at the new Lusaka brewery started in December 2014, later than anticipated due to commissioning problems

“This was the main contributing factor to the poor financial performance of the business in the second half of the year. We are pleased to report that the commissioning issues have now been successfully resolved,” said Mr Lubbe.

Earnings before interest, tax and amortisation for the year came under pressure due to the supply issues and reduced by K30 million versus prior year, exacerbated by the weaker kwacha, which increased packaging costs. While the business took on the overhead costs and employees associated with running the new Brewery, the poor volume delivery diluted margins.

The meeting also highlighted competition from illegal bulk opaque beer.  As consumers continue to face pressure on their disposable income due to economic conditions, the company saw them opting to buy cheaper and less sanitary illicit bulk offerings. This has had a negative effect on the overall volume performance of the business particularly in the northern part of the country. This continues to be a challenge due to the selective and non-enforcement of SI No. 72 of 2012 – The Liquor Licensing (Intoxicating Liquor) (Quantities and Packaging) Regulation, 2012.

“The big competition is from formal companies who are well established breweries who are delivering bulk opaque beer very blatantly in front of the authorities. We are engaging local councils on the issue and we are looking at what other avenues are available to take action and encourage the authorities to enforce the regulations,” said managing director Annabelle Degroot.

The balance sheet closed the year with a total asset base of K325 million versus K227 million in 2014. This is indicative of the capital investment in plant and equipment, mainly, at the Lusaka plant.

Shareholders also heard about the National Breweries sustainable development agenda under the SABMiller Prosper strategy, through which the company seeks to achieve five imperatives: accelerate growth and social development across our entire value chain; endeavour to make products the natural choice for the moderate and responsible drinker; secure shared water resources for the business and local communities; create value through the reduction of waste and carbon emissions; and support responsible, sustainable use of land for brewing crops.

The major new initiative under the Prosper agenda during the year was the set up and launch of a major opaque carton recycling project.  Under this project, the company is determined to take responsibility for improving the environment by establishing a collection network and market for recycled cartons produced in the opaque sector.

Shareholders also heard that National Breweries was looking ahead with confidence in the country’s potential to register growth and development for its people.

“This is on the back of a steady growth of the GDP rate. Government’s continued investment in infrastructure projects will continue to spur economic activity and promote employment creation. We stand as a long term investment partner with the Government of the Republic of Zambia and the community. We have confidence that we will be able to return the business to growth in the next financial year,” said Ms Degroot.