SENS ANNOUNCEMENT. (the Notice or Announcement )

Transcription

1 SENS ANNOUNCEMENT (the Notice or Announcement ) ISSUER ZAMBIAN BREWERIES PLC ( ZAMBREW ) [Incorporated in the Republic of Zambia] Company registration number: Share Code: ZAMBREW ISIN: ZM Authorised by: Deborah Bwalya Company Secretary SPONSOR Stockbrokers Zambia Limited [Member of the Lusaka Stock Exchange] [Regulated and licensed by the Securities and Exchange Commission of Zambia] Contact Number: Website: APPROVAL The captioned Notice or Announcement has been approved by: i. the Lusaka Stock Exchange ii. the Securities and Exchange Commission iii. Stockbrokers Zambia Limited RISK WARNING The Notice or Announcement contained herein contains information that may be of a price sensitive nature. Investors are advised to seek the advice of their investment advisor, stockbroker, or any professional duly licensed by the Securities and Exchange Commission of Zambia to provide securities advice. FIRST ISSUED: 19 November 2014

2 ZAMBIAN BREWERIES PLC Interim Results for the six months ended 30 September 2014 The Board of Directors of Zambian Breweries Plc., in compliance with the requirements of the Securities Act No.38 of 1993 and the Listing Requirements of the Lusaka Stock Exchange is pleased to announce the unaudited results of the company for the six months ended 30 September INCOME STATEMENT SIX MONTHS ENDED 30 SEPTEMBER % K'000 K'000 Change Volumes (Hls 000) Soft Drinks % Beer % Total 998 1,053-5% Revenue 646, ,681 2% Gross Profit 318, ,618-3% Profit from ordinary activities before exchange losses, interest and taxation 100, ,851-28% Operating exchange losses (4,581) (8,588) 47% Operating profit (EBITA) 95, ,263-27% Finance costs (25,186) (24,022) 5% Profit before tax 70, ,241-34% Income tax (21,801) (39,262) -44% Profit after tax 48,524 66,979-28% Earnings per share (Kwacha) %

3 BALANCE SHEET AS AT 30 SEPTEMBER ASSETS EMPLOYED Property, plant and equipment K'000 K'000 1,328,005 1,192,561 Current assets 370, ,152 Total assets 1,698,717 1,637,713 EQUITY & LIABILITIES Shareholders funds 894, ,816 Non-current liabilities 203, ,867 Current liabilities 601, ,030 Total equity and liabilities 1,698,717 1,637,713 Financial Review The first half of the 2015 financial period has been particularly challenging. On 1 January 2014, the business was obliged to take a 16% price increase on Clear Beer to reflect the 50% increase in the excise rate from 40% to 60% as announced by the Government in the 2014 budget. The unprecedented price increase impacted Clear Beer volumes as anticipated and we saw a 23% decline in total Mosi and Castle volumes in the period as the cost of our beer became out of reach for many of our consumers. This has been exacerbated by tough economic conditions leaving our customers with less cash in their pockets and further impacting demand. As a result of the currency depreciation in the first quarter, the Government introduced tight monetary policy conditions. This has increased interest rates, further reducing the disposable income of the average consumer. We attempted to mitigate this decline with a strong focus on Economy brand offerings such as our Sorghum based Eagle brand and continued growth in the smaller premium sector with Castle Lite. However, the reality has been that many of our Clear Beer consumers have down traded to

4 Opaque beer (primarily illegal bulk) and cheaper spirits. Total Beer volumes ended down 16% on prior year. We did however experience strong Soft Drink (CSD) growth of 13%, confirming that the Government s decision to remove excise duty in the prior year supported growth. While lower soft drink prices as a result of this decision made soft drinks more accessible to the consumer, our VAT collections on CSD were greater in this period than the combined Excise and VAT collections in the previous year as a result of this volume growth. The strong performance of CSD growth softened the impact of the decline in our mainstream volumes. Total volumes for the business ended down 5% on prior year. Revenue was up on prior year by 2% mainly due to the 16% price increase on Beer on 1 January 2014, the 3% further price up of Castle Lite in the period and a 9.5% CSD PET price up on 1 August The significant Kwacha depreciation against all major currencies particularly in the first quarter increased our Cost of Sales. An increase in distribution costs as a result of our continued effort to access dry areas meant that gross margins ended 3% down on prior year. The decline in Operating Profit (EBITA) on prior year of 27% on the back of a gross margin decline of 3% reflects exceptional costs in Fixed Costs related to job redundancies announced in September and a reallocation of storage costs from variables costs. We reduced full time positions by 122 heads in the period. In addition, management fees increased on prior year as a result of tax legislation and deprecation increased as the full Ndola project came on line. While focus has been placed on variable cost efficiencies and fixed cost restraint, we recorded a significant drop in Profit After Tax (PAT) in the first half compared to prior year of 27%. Strategic Review and Prospects Economic conditions were generally unstable during the first half of the year with the Kwacha depreciating against all major currencies.

5 Strategic Review We have had a half year of mixed fortune in our business with. Although our soft drinks volumes were up 13%, and our Net Producer Revenue grew by 4%, our lager volumes were down 16%, driven by excise-related price increases taken in January We consequently restructured our fixed costs which resulted in organizational changes and also had a directly reduced planned Capital Investment in the period. Prospects We have great confidence that Zambia s economy will continue to grow in the near- to mediumterm led by the country s continued investment in strategic infrastructure projects and growth in the agriculture and mining sectors. However, restriction in monetary policy during the period under review has constrained household spending to essential goods and services. This, coupled with the relatively high clear beer prices caused by a high excise tax regime, will continue to hamper our clear beer volume performance and inevitably the performance of our business. We expect to face continued difficult trading conditions in the second half of our financial year mitigated to some extent by momentum of our soft drinks business and Eagle lager. Following the approval of our Environmental Impact Assessment for our Barley Malting plant at the Lusaka South Multi-facility Economic Zone, we have begun construction works of a 15,200 tonnes per annum, US$32.6 million dollar plant that will herald a new chapter in our local sourcing programme. Our Malting Plant, which is targeted to commerce operations in the first quarter of 2016, will not only secure our barley input supply but will also save Zambia approximately US$10.0 million dollars annually in import costs. This is money that will now be spent in the local economy on farmers and businesses as they will be participating in our barley value chain. Sustainable Development Zambian Breweries plc. has launched a new sustainable development ambition called Prosper. Stemming from the Ten Priorities for sustainable development that have guided us in the past eight year, Prosper is a more focused strategy that is aimed at putting sustainability at the core of our business. Zambian Breweries aspires to protect and grow its business by stepping up its contribution to local communities even further. We have decided to expand and scale up the partnership approach that we have developed over the years to deliver for everyone.

6 Under Prosper we aspire to achieve five imperatives that are aligned to five shared opportunities as follows: 1. A thriving world, where incomes and quality of life are growing; 2. A sociable world, where our beers are developed, marketed, sold and consumed in a way that maximises individual and societal wellbeing; 3. A resilient world, where our businesses, local communities and ecosystems share uninterrupted access to safe, clean water; 4. A clean world, where nothing goes to waste and emissions are dramatically lower; 5. A productive world, where land is used responsibly, food supply is secure, biodiversity is protected and brewing crops can be accessed at reasonable prices. As part of the SABMiller Sustainable Development Plan, Zambian Breweries Plc. has continued to implement socio-economic programmes that are aimed at reducing poverty in the communities in which we operate and creating shared value among stakeholders. For queries, kindly contact Luke Njovu, Director of Corporate Affairs on: Tel /3; By Order of the Board Deborah Bwalya COMPANY SECRETARY 19 November 2014

7 ZAMBIAN BREWERIES PLC Interim Dividend FOR THE PERIOD ENDED 30 SEPTEMBER 2014 The Board resolved not to recommend an interim dividend payment for the half year ended 30 September This position will be reviewed at the year end. By Order of the Board Deborah Bwalya COMPANY SECRETARY 19 November, 2014 LUSAKA STOCK EXCHANGE SPONSORING BROKER STOCKBROKERS ZAMBIA LIMITED [MEMBER OF THE LuSE and REGULATED BY THE SECURITIES AND EXCHANGE COMMISSION OF ZAMBIA] T: W: