Natbrew (Zambia) – FY22 volumes down 16%, spurred by decline of informal exports of Chibuku Super

National Breweries Plc (NATBRW.zm) 2022 Abridged Report

Overview

The company offered a full range of affordable and aspirational packs during the year. The return to draught operations and the re-introduction of the 1.5L returnable bottle offered consumers a much wider choice among our affordable products. At the same time the company aimed to improve the availability of these packs by driving a penetration strategy aimed at increasing product presence and visibility in all markets. In the last quarter of the financial year, the business also started exports of Chibuku Super into Zimbabwe. The full benefits of these strategies are expected to accrue in the next financial year and beyond when financial performance and cash flows are expected to improve.

Volume performance in the current year was affected by the decline of informal exports of Chibuku Super, the increase in excise and general product prices and Covid-19 restrictions which affected product availability in the market. Overall volumes declined 16% compared to the previous year while revenues ended 18% lower. Margins were under pressure from the increased raw material prices in the second half of the year. In addition, the margins were further depressed by distribution costs which peaked in the last quarter because of the increase in fuel costs. The strengthening Kwacha resulted in an exchange gain of K45m on revaluation of foreign currency liabilities.

Consequently, the company posted a year-end operating loss of K88m versus K168m for the prior year. Net financing costs increased by 70% largely due to the interest incurred on intercompany borrowings. The company posted a loss after tax of K120m and loss per share of K1.91 versus K193m and K3.05 for the prior year.

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 financial year under review.

Prospects

The company continues to intensify efforts to drive volume growth by offering quality and competitively priced products to its consumers. The current efforts to improve product availability by focusing on outlet penetration are expected to yield volume growth in the immediate term. Increased exports into Zimbabwe will also contribute to volume growth while earning the company valuable foreign currency to fund working capital requirements.

By Order of the Board

Vongai Chiwaridzo
Company Secretary

Issued in Lusaka, Zambia on 07 June 2022

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