Breweries Announces Huge Profit

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By Mbatjiua Ngavirue WINDHOEK Namibia Breweries Limited on Friday announced a dramatic increase of 194% in its operating profit from the previous year, which translates into an operating margin of 10.9% compared to 3.9% in the year before. The operating profit increased from N$34,503 million in 2005 to N$101,499 million in 2006. The company says this amounts to an increase of 79% even after removing the N$22,2 million provision in respect of restructuring costs and impairment of assets included in the 2005 results. Net profit rose from N$20,100 million in the preceding year to N$83,265 million in the latest reporting year. NBL Financial Director Ciaran Duffy said the significant increase in operating profit could largely be attributed to cost savings throughout the business together with a continued focus on growing sales volumes. The most important cost savings were the closing of Hansa Brewery in Swakopmund and the outsourcing of primary distribution (long distance) to a third party. There was an overall 3.5% reduction in operating expenditure. Namibia Breweries grew its beer volumes in Namibia for the second consecutive year. The company says that although the growth levels are low, the board regards this as a significant achievement in such a competitive market. Duffy however says the company is not prepared to disclose exactly what its sales volumes are. The company apparently feels disclosing sales figures might place it at a competitive disadvantage to competing regional giants such as SAB Miller. The company was particularly pleased with the performance of Windhoek Lager, which showed strong sales growth during the year. Hansa Pilsener was only launched in June 2005 but made a significant contribution to beer volumes in the year and will remain an important part of the group’s beer portfolio, according to NBL. Namibia Breweries 2006 financial report says soft drink sales declined in the year as a result of intense competition especially in terms of discounting. Speaking on Friday, Duffy hinted the competition in the soft drinks market comes mainly from Namibia Beverages, which is a bigger player in this market. The financial report says soft drinks however continue to play a key role in the Group’s strategy and new initiatives have been put in place to protect and grow their soft drinks business. “Namibia remains a highly competitive in both beer and soft drinks. Increasingly, in the beer market, this competition comes not only from competing beer brands but also from other alcoholic drinks such as imported wines and other drinks, which act as substitutes for beer,” the company says. Namibia Breweries’ beer sales in South Africa declined marginally in the first six months of the year This decline was halted in the second half with overall sales volumes in South Africa in line with the previous year. The board says it believes the growth achieved in the second half is a positive indicator that initiatives and investments put in place are starting to yield results. The beer maker launched Windhoek Lager in a 750ml non-returnable pack size on the South African market in the second half of the year. The company says this is the most popular bottle size in South Africa and should allow it access to a new range of consumers and drinking occasions. Exports to markets other than South Africa experienced strong growth of 20%, with sales volumes in both beer and soft drinks showing double-digit growth. This growth came from the primary non-SA export markets of Angola and Botswana with other key markets being Kenya and Mozambique. Increased sales in Botswana, Duffy explained, could be partly attributed to NBL introducing its own dedicated sales force in the country. “Botswana is becoming important to us. Volumes are small but if we can increase our market share it will be meaningful to us,” he said. The company introduced Heineken to the Angolan market in the last quarter of the year. This brand was previously supplied to the Angolan market directly from the Netherlands, and the company says the change demonstrates the benefit of its strategic partnerships.

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