Staff Writer
Simonis Storm has raised concerns over Namibia Breweries Limited’s (NBL) weaker export base, tighter liquidity and dividend policy after the brewer reported a 22.7% decline in after-tax profit for the six months ended 30 June 2026.
NBL earned N$153.8 million after tax during the period, compared with the previous year, while headline earnings per share fell 24.3% to 74.0 cents.
The company declared an interim dividend of 74.45 cents, representing a full distribution of earnings.
In its assessment of the results, Simonis Storm said the key issue was the reset of NBL’s export business following the lapse of the Heineken Beverages minimum volume commitment in April.
Beer volumes to South Africa fell 38.2%, contributing to a 20.6% decline in operating profit to N$221.8 million. The operating margin narrowed to 11.0% from 13.3%.
Simonis Storm said Heineken related sales fell 13.2% to N$289 million, with only two months of the new supply model reflected in the reporting period.
The full impact will therefore be reflected in the second half, while no replacement export volume has been disclosed.
The research house said the weaker export base creates pressure on NBL’s full-year earnings outlook. The first half delivered 29.0% of its FY2026 operating profit forecast, compared with 33.6% in the comparable period of 2025.
It said the published full-year operating profit forecast of N$765 million would require N$543 million in the second half, compared with N$551 million generated in the second half of FY2025 when export volumes were still contractually protected.
Simonis Storm has consequently cut its FY2026 headline earnings per share forecast by 17.3% to 230.7 cents and its FY2027 forecast by 11.9% to 267.8 cents.
The research house also highlighted NBL’s dividend-funded increase in short-term borrowing.
NBL paid dividends of N$432.2 million during the six months, 34% more than a year earlier and above free cash flow of N$241 million.
The shortfall contributed to the overdraft increasing to N$508.4 million, while net debt rose to N$546.5 million.
Simonis Storm said the company’s net debt-to-equity ratio had increased to 25.2%, while the current ratio stood at 0.91 times and the quick ratio at 0.44 times.
“Funding moved the other way,” Simonis Storm said, noting that term borrowings fell 56.9% to N$86.2 million while the overdraft increased 60.2%.
Despite the tighter liquidity position, the research house said NBL’s reported gearing and interest cover did not indicate immediate financial distress, although liquidity had tightened.
“The issue is capital allocation,” it said, pointing to the company’s continued 100% dividend payout.
Simonis Storm estimates that maintaining a 100% payout would exceed free cash flow to equity by about N$274 million over FY2027 to FY2031.
It said continued full distribution and deleveraging would therefore require either another working-capital release or lower investment.
NBL’s balance sheet contracted 3.1% to N$3.69 billion, with most of the movement attributed to working capital.
Receivables fell 40.6% to N$416.6 million, partly reflecting lower export billing to South Africa, while payables declined 26.0% to N$540.0 million.
Cash generated from operations before tax and dividends rose 12.0% to N$482 million, helped by a N$282 million release of receivables since December.
Simonis Storm cautioned that the working-capital release was the main source of the stronger operating cash flow and was not repeatable at the same scale.
Domestic business shows resilience
The domestic business performed better than the export operation despite pressure on household incomes.
Namibian beer volumes declined 3.3%, while cider volumes increased 15%. Simonis Storm said the company’s total portfolio market share increased, with Windhoek Non-Alcoholic Lemon and Red Bull also contributing to the broader portfolio.
Net revenue declined 3.9% to N$2.02 billion, while gross sales of goods fell 4.8% to N$2.57 billion.
The decline in revenue occurred despite discounts allowed falling 13.8% to N$125.7 million, equivalent to 4.9% of gross sales compared with 5.4% previously.
Simonis Storm said the revenue decline therefore reflected volume and product mix rather than deeper discounting.
The remaining business outside Heineken-related sales generated N$1.73 billion, including N$66.6 million in royalties, and declined 2.1%.
The decline was partly offset by stronger cider sales, broadly flat spirits and the Red Bull agency.
However, operating expenses fell only 1.3% to N$1.80 billion, compared with the 3.9% decline in net revenue.
Simonis Storm attributed the cost pressure to employment costs, increased brand investment and the reorganisation of the business around a permanently smaller export base. N$8.7 million in restructuring provisions were settled in cash.
The tax rate also increased to 25.5% from 24.9%.
Simonis Storm said August inflation of 5.0% and a 25.1% increase in fuel prices could support firmer domestic pricing, but would also increase distribution and packaging costs.
NBL’s capital expenditure also increased, with N$156.1 million spent during the first half. Simonis Storm raised its FY2026 capital expenditure assumption to N$300 million from N$250 million, citing spending on the Digital Backbone ERP programme.
The research house maintained a target price of 2 700 cents, up from 2 610 cents, attributing the increase to its discount rate rather than an improvement in its assessment of the business.
At 3 225 cents, NBL shares trade at 12.0 times Simonis Storm’s FY2027 headline earnings forecast. The research house estimates an expected total return of negative 9.1%, including dividends, within its stated Hold range.
