Namibia Breweries Limited has reported revenue of N$2.11 billion from the sale of beer, courtesy of the huge returns from the sales of Tafel Lager.
This is at a time when beer exports to other countries, excluding South Africa, are in decline. "Sales to Zambia, Botswana and Mozambique have decreased with alcohol levies continuing to put pressure on volumes in Zambia and Botswana," NBL said in its trading report for the year ended June 30 2015.
"The Namibian market continues to remain a significant contributor to total revenue and earnings with Tafel being the main driver of the overall beer growth. Ready to drink category volumes have increased compared to the prior year. The soft drink category continued its double digit growth in the current year," says the company.
Beer sales to Tanzania "saw good growth" while exports to South Africa are expected to deliver good results in due course.
Revenue from soft drinks came in at N$121 million, from ready to drink at N$83 million while other merchandise brought in N$7.15 million.
NBL increased its turnover by 5 percent to N$2.4 billion and increased its operating profit by 12 percent to N$507 million for the financial year under review.
Headline earnings per share increased 17.6 percent to 187.1 cents and final dividend per ordinary share was 37 cents.
"NBL exceeded all expectations despite increased competitor activities, market forecasts and volume migration to South Africa. Even though we are extremely proud of our financial performance for F15, we remain focussed on the job at hand and are working relentlessly towards executing our long-term goals and objectives to achieve our F19 ambitions," said NBL's managing director, Hendrik van der Westhuizen.
"We are extremely optimistic with what the future holds for NBL and the new joint venture structure in South Africa. Conclusion of the joint venture is subject to approval from the Competition Commission. However, we are confident that once approval is received both NBL and Heineken will greatly benefit from the opportunities that exist in the South African market," added Van der Westhuizen.
Analysing the latest results, local stock brokerage Simonis Storm Securities (SSS) maintained their "sell" rating for the company. The analysis noted that NBL's raw materials and consumables' costs declined 7.2 percent or N$66.8 million year-on-year, brought about by a 24 percent drop in global barley prices, which have dropped about 50 percent over the last 24 months, as well as a relatively stable N$/USD exchange rate.
However, SSS does not expect this windfall to be long lived, noting that barley prices have probably bottomed out and the firm expects raw material prices to begin picking up over the coming year.
"If it wasn't for the 24 percent drop in global barley prices over the year, earnings per share growth would have been flat. It is hard to see commodity prices falling further, bringing an end to this windfall. The weakening N$ and operational cost pressures are likely to put future earnings growth under pressure. However, working capital has been managed well this year, resulting in improved operating cash flows, suggesting that management know what they are doing," says the SSS report.
SSS also noted that NBL has committed N$610 million to the Sedibeng balance sheet, funded by a N$200 million medium-term loan, with the rest expected to be funded from operations.
"The annual financing cost (interest paid plus cost of capital) is likely to be northwards of N$60 million this coming year. Therefore additional earnings from the increased stake in the South African operations will have to exceed these financing costs to make the deal worthwhile. Our updated FY16E EPS and dividends per share is 120.5cps and 93cps respectively, giving a forward dividend yield of 4.2 percent and headline earnings cover ratio of 2.0 times," added SSS.
