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Affordable beer fuels ZB growth

Filed under: Business,Latest News |
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unnamedCompetitive beer prices, attention to sales execution and a wide range of beverage options helped Zambian Breweries achieve a 27 percent increase in operating profit in the last financial year.

A 30 percent rise in clear beer sales volume in the year ending March 31, 2016 meant the company saw greater efficiencies and economies of scale, boosting operating profit to K318 million.

A 68 percent increase in volumes of the company’s affordable Eagle beer brewed from cassava and sorghum bought from local small-scale farmers contributed to the growth and contributed to a 55 percent increase – to K84 million – in corporate tax liability for the government.

“Despite the reduction in clear beer excise from 60 percent to 40 percent on January 1, 2016, we are pleased to report that in the quarter from January, 2016 to 31 March 31, 2016 we paid 20 percent more VAT and excise than in the prior period. The excise adjustment allowed us to ensure competitive pricing of our products which in turn generated both volume and tax revenue growth,” Managing Director Annabelle Degroot told shareholders at the company’s annual general meeting (AGM) today (July 1).

“The reduction in excise rates allows Zambian Breweries to continue with its long-term investment and growth strategy, creating employment and driving economic sustainability. The 40 percent excise rate has been a win for Zambian Breweries, a win from government and a win for consumers,” she added.

She also attributed the improved operational performance to the company’s steadfast focus on growth by delivering quality, choice and value, which has resulted in a strong performance. Sales volumes were up 18 percent in total, reflecting a 30 percent growth in beer volumes and a 4 percent growth in soft drink volumes compared to the previous year. This improved mix towards beer helped grow the company’s net revenue by 27 percent to K1.7 billion, ensured improved margins and delivered an increased operating profit by a healthy 27 percent.

“This is a great result for us at Zambian Breweries. Our company has seen significant growth over the past year by staying true to its core business of delivering excellence, choice and value. Our focus is to ensure that we keep the momentum going by giving our customers the best product imaginable,” said Degroot.

“It has largely been a good financial year with many of our brands performing well, both in terms of volume and kwacha. This is a testimony of the hard work the Zambian Breweries staff puts in, especially in the face of the challenges in Zambia’s macro economy,” she added.

National Breweries new state-of-the art Chibuku plant investment in Lusaka

National Breweries new state-of-the art Chibuku plant investment in Lusaka

Meanwhile, Zambian Breweries sister company, National Breweries, both part of the SABMiller Group in Zambia, reported a 37 percent drop in operating profit to K27 million despite a 5 percent rise in production of its Chibukuopaque beer.

Continued pressure on Shake Shake volumes from illegal bulk opaque beer sales and continued exchange rate depreciation impacted costs. The exchange rate impact was mitigated to some extent the company’s hedging strategy, however, helping the company to report a profit before tax increase of 23 percent..

Degroot attributed the improvement to the company’s new US$30 million state-of-the-art Lusaka factory. With the new plant on-stream, the business saw strong volume growth and total volumes driven by a 74 percent increase in Chibuku Super volumes compared with the previous year, offset by a 6 percent decline in Shake Shake carton volume.

The new factory, which was commissioned in April 2016 by the Minister of Commerce, Trade and Industry Margaret Mwanakatwe, is set to increase capacity from 1 million hectolitres of Chibuku per year to 1.5 million hectolitres, with the option to expand further to 2.5 million hectolitres.

“We are pleased by the strong growth our business has registered. Profit before income tax for the year was up 23 percent compared to the previous financial year. This was achieved due to the strong volume growth of our premium Super brand delivering an improved product mix. The new plant, enhancement in manufacturing processes, plant upgrades elsewhere and overhead cost management helped drive the good results,” she said.

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