Namibia Breweries Limited (NBL) says it is implementing a strategic shift to overcome the industry’s limitations, amid saturation of the country’s beer market.
The group’s Chief Executive Officer Peter Simons noted the pressing need for increased efficiency and cost-effectiveness within the beer business.
“While beer is a significant part of the business, it has become a saturated market,” Simons said on Friday, weighing in on the challenges within the local beer market.
“We now have a category that we can play much broader than just beer, and some of these categories bring more profits than the beer business will bring. It’s not about selling more beer, it’s about selling better with higher margins within the different categories that we have. I see it as an opportunity, I don’t see it as a risk,” Simons outlined NBL’s strategy.
He pledged to implement Heineken’s best practices to achieve these goals.
Despite the challenges in the beer market, he said NBL remains committed to its investments and plans for the future with capital investments to prepare the business for multi-category volumes that will yield attractive future returns.
Simons noted that capital investment projects are in full swing, with NBL upgrading elements of its non-returnable bottling line and expanding its packaging hall.
“Further expansions to warehousing and empties-yard facilities are underway. Capital expenditure amounted to N$244 million (2022: N$139 million),” Simons said, confirming that NBL would continue to invest in realising the significant synergies and agreed upon within the beer industry.
Waldemar Von Lieres, NBL’s Finance Director, acknowledged the beer market’s constraints, stating that, “beer has pretty much reached its limit.” He added; “In Namibia, small growth can be expected, but the real incremental or bigger growth will come from other categories and opportunities.”
This comes as the Group’s operating profit for the year ending 30 June 2023, was primarily impacted by reduced sales volumes, significant cost increases throughout the supply chain, lower production volumes, and expenses related to finalising the transactions with Distell and Heineken.
The debt-to-equity ratio increased from 41% in the previous year to 65% driven by third-party financing obtained for the acquisition of Distell, as well as substantial distributions made to shareholders, which resulted in an overall decrease in equity.
On 30 June 2023, the group managed to repay substantial portions of its borrowings.
Simons highlighted the strategic significance of the merger, stating that it has created a powerhouse in the beverage industry, with an impressive array of products that encompass beer, wine, spirits, and cider.
“The great thing with bringing these two companies together is obviously the category of brands that we bring together. We’ve now been able to bring that portfolio together and really play for future opportunities,” he said.
Meanwhile, despite a strained local economy, declining disposable income, and increased competition, the Namibian market remained a significant contributor to NBL’s total revenues and earnings.
Key brands such as Windhoek Draught, Tafel Lager, and Heineken spearheaded overall beer growth.
NBL reported a consolidated net revenue increase of 12%, rising from N$3,021 million to N$3,388 million for the year ending on 30 June 2023.
This growth was primarily driven by price increases in response to high inflation on input costs, coupled with the acquisition of Distell in April 2023.
However, despite the substantial profit increase, headline earnings dipped by 30% to 162.7 cents, compared to 233.1 cents in 2022, primarily due to challenging trading conditions.
