Namibia Breweries Limited (NBL) forecasts that it will pay between NS$40 million to N$45 million to the Receiver of Revenue, following last week’s increase in tax levied on beer to an effective 15 percent, starting in 2019.
Managing Director, Wessie van der Westhuizen told the Windhoek Observer that they plan to absorb the increase in tax through increased sales and cost-cutting measures.
Finance Minister, Calle Schlettwein, announced an additional 5 percent on beer and tobacco products in his budget speech last week Wednesday, saying that government was hoping to earn about N$500 million from the increase in all taxes, including an export levy and a fuel levy.
With tax in malt beer reaching 10 percent and the additional 5 percent bringing the total tax on beer to 15 percent, NBL Managing Director, Wessie van der Westhuizen, told the Windhoek Observer that the company will find a way to factor in the increased tax.
“It is obviously a massive impact. We calculated the 15 percent to be between N$40 million to N$45 million. We are always bombarded with these things, but we have managed to find ways, whether through increased sales, or reduced costs. We will find ways and means of how to get through that,” Van Der Westhuizen said.
NBL’s financial results for the half year ended 31 December 2017, showed Namibian, South African and export volumes decreased by 1,8 percent, 22,9 percent and 1,8 percent, respectively.
This resulted in the overall beer volumes and revenue decreasing by 7,7 percent and 3 percent, respectively.
Operating profit at N$345 million was 5,8 percent higher than the comparative period due to a decrease in operating expenses, attributed to improved efficiencies.
The NBL board declared an interim dividend of 46 cents on 1 March 2018, which represents an increase of 9,5 percent from the previous period.
The company’s revenue decreased by three percent to N$1,4 billion, with the company’s profit after tax increasing by 150,2 percent to N$240 million.
“This increase is mainly attributable to exceptional performance of Heineken South Africa during the period.”
The company attributed the decline in beer sales to a strained local economy, challenges in export markets and declining consumer spend.
“Our half-year performance demonstrates NBL’s resilience and ability to adapt to changes within our operating environment. It is also the direct result of our employees taking ownership of challenges and creating opportunities to bring our purpose to life. Without this, NBL would have delivered a very different result,” Van Der Westhuizen said.
Despite the decline in beer volumes, NBL still enjoys a dominant market share in Namibia.
Its craft brand, Camelthorn, was relaunched in July 2017, allowing it access to the growing craft beer segment in both South Africa and Namibia.
“Innovation in this category is specifically aimed at growing the craft beer segment, and responding to consumers’ ever-changing needs,” the NBL MD said.
NBL also launched the Strongbow cider brand in Namibia, allowing it entry into the cider market and further diversifying its product portfolio.
NBL said it will continue to further explore investment opportunities in promising markets and believes its investment in South Africa will increase its overall profit derived from that market.