CREATING A FUTURE, ENHANCING LIFE Our purpose and shared value INTEGRATED ANNUAL REPORT 2017 DLG AWARDS* WINDHOEK WINDHOEK WINDHOEK TAFEL URBOCK LAGER DRAUGHT LIGHT LAGER 2017 2016 NP 2015 NP 2014 NP 2013 NP 2012 NP 2011 NP 2010 NP 2009 NP NP 2008 NP NP 2007 NP Windhoek 2006 NP Lager Gold Silver Bronze NP Not participating recently won its 11th consecutive * The international Deutsche Landwirtschafts Gesellschaft (DLG) Quality Evaluation gold medal at the rates beer brands brewed according to the Reinheitsgebot (“Purity Law”) of 1516 DLG awards. against quality specifications for taste, analytical and biological standards. TABLE OF CONTENTS ABOUT THIS REPORT 2 CHAIRPERSON’S STATEMENT 4 NBL PROFILE 9 A NAMIBIAN INVESTMENT WITH LONG-TERM PROSPECTS 16 OPERATING ENVIRONMENT 19 MANAGING DIRECTOR’S REPORT 25 VALUE ADDED STATEMENT 33 CREATING SHARED VALUE 37 GOOD CORPORATE GOVERNANCE 59 APPENDIX 77 ANNUAL FINANCIAL STATEMENTS 83 NAMIBIA BREWERIES LIMITED 1 INTEGRATED ANNUAL REPORT 2017 ABOUT THIS Chairperson’s NBL A Namibian Operating Managing REPORT statement profile investment environment Director’s report ABOUT THIS REPORT Namibia Breweries Limited (NBL) is a publicly Reporting boundaries owned company that listed on the Namibian Stock NBL forms part of the Ohlthaver & List (O&L or the Exchange (NSX) in 1996. This report relates to the O&L Group) Group of companies – Namibia’s largest financial year from 1 July 2016 to 30 June 2017 and privately held Group of companies – with revenues covers all operations, with the emphasis on Namibia contributing about 4% to gross domestic product as NBL’s core market. The report provides a holistic (GDP). The O&L Group has business interests in yet concise overview of social, environmental and food production, fishing, beverages, farming, economic factors that affect the ability of NBL to retail trade, information technology, property create value over the short, medium and long term. leasing and development, renewable power The report is aimed at NBL’s providers of financial generation, marine engineering and the leisure capital, but considers a wide range of stakeholders and hospitality industry. O&L indirectly holds an and topics. The principle of materiality was applied effective 29.69% stake in NBL. to information gathered during the content Financial and non-financial data in this report is development process. This ensures that the report limited to NBL, its subsidiaries and associates. covers all material aspects of NBL’s operations This report also takes into account NBL’s risks, that could impact its ability to create value. The opportunities and partnerships with its stakeholders. integrated reporting approach and structure allows Stakeholders are those individuals or groups who for comparability of financial and non-financial data. can be affected by NBL’s business activities, outputs The following frameworks and reporting or outcomes, or who can significantly affect NBL’s requirements were considered: ability to create value over time. zzCorporate Governance Code for Namibia Assurance (NamCode) The consolidated annual financial statements from zzNamibia Companies Act, 2004 (No. 28 of 2004) page 84 to 143 were audited by Deloitte & Touche. zzNamibian Stock Exchange Listing Requirements As per the NamCode requirements, NBL follows a combined assurance model based on the zzInternational Financial Reporting Standards three lines of defence, which includes internal zzInternational Integrated Reporting Council’s controls and systems, supported by external (IIRC) Integrated Reporting <IR> Framework verification. The latter included an SABS audit against the requirements of SANS 10330:2007 Further information and the electronic on 1 to 3 August 2017 and an SABS recertification version of this report is available on the against the requirements of ISO 9001:2008. website: www.nambrew.com. Several internal audits were also conducted by EY during the year. To provide feedback on or request copies of this report, contact our Company Secretaries, Ohlthaver Read more about our internal audit & List Centre (Proprietary) Limited, on telephone: programme on page 71. +264 61 207 5111 or email: [email protected]. 2 Value added Creating Good corporate Annual financial Appendix statement shared value governance statements Forward-looking statements Board approval This integrated report contains statements about The Board, assisted by the Audit Committee, NBL that are or may be forward-looking statements. is ultimately responsible for the integrity and Examples of forward-looking statements include completeness of this report. The Board has statements regarding a future financial position or applied its collective mind to the preparation future profits, cash flows, strategy, estimates of capital and presentation of the report and, accordingly, expenditures, acquisition strategy or future capital approved it on 5 September 2017. expenditure levels, and other economic factors such as interest and exchange rates. These may generally Navigational icons be identified by the use of forward-looking words or The following icons are applied throughout the phrases such as ‘believe’, ‘aim’, ‘expect’, ‘anticipate’, report to improve usability and navigation between ‘intend’, ‘foresee’, ‘forecast’, ‘likely’, ‘should’, ‘planned’, the relevant elements of the report. ‘may’, ‘estimated’ and ‘potential’, or similar words and phrases. By their nature, forward-looking statements This icon is used for referring to involve risks and uncertainties because they relate to NBL’s website: www.nambrew.com. events and depend on circumstances that may or may not occur in the future. NBL cautions that forward- This icon is used for cross-referencing looking statements are not guarantees of future in the report. performance. Ohlthaver & List Finance and Trading Heineken Namibia B.V. Corporation Limited (OLFITRA) NBL Investment Holdings 50.0% 50.0% (Proprietary) Limited Public shareholders 59.4% 40.6% Namibia Breweries Limited Heineken South Africa 25.0% (Proprietary) Limited NAMIBIA BREWERIES LIMITED 3 INTEGRATED ANNUAL REPORT 2017 CREATING A FUTURE CHAIRPERSON’S STATEMENT ENHANCING LIFE Dear Stakeholders Purpose-driven highlights This integrated report looks back on a tough The success of NBL’s relationship with Heineken South Africa is a major highlight for 2017. year that tested the resilience of NBL. A strained local economy, persistent drought, challenges Multiple opportunities exist for NBL to innovate in export markets and declining consumer through its sales, marketing and distribution agreement with Heineken. This includes leveraging spend contributed to ongoing volatility in Heineken’s beer and cider portfolio to expand NBL’s our environment. brand offering. It is envisioned that, going forward, the Group’s Despite this, NBL delivered strong financial results craft portfolio will be positioned within Heineken that defied expectations. Turnover increased by South Africa. This will enable craft brewers to tap 11.7%, and has increased annually by 4.6% into the experience and knowledge of a worldwide over the past five years. Operating profit was role-player in the beer market, while gaining N$611 million, which is a 13% increase on the economies of scale through global route to market, previous year. Return on assets was 32.1% (2016: brand management and distribution. 31.4%), whereas the return on ordinary shareholders’ funds decreased to 23.9% (2016: 32.4%). For example, Heineken South Africa announced its intention to acquire Stellenbosch-based craft To succeed in difficult times, we continue to brewery, Stellenbrau. Through this collaboration, work hard to ensure that our people’s individual Stellenbrau will form part of Heineken’s global purposes connect with what we want to achieve as brewing concern, with NBL providing support a business. If our people are aligned with and have to brewers. In the past year, NBL assisted a strong passion for why we do what we do, we Stellenbrau with product pack renovations and can more easily overcome obstacles and generate format extensions that are more aligned to breakthrough thinking that carries our purpose, consumer needs. Creating a Future, Enhancing Life, into our brands, people practices and business initiatives. NBL South Africa is a regional corporate office focused specifically on capitalising on the popularity Sharing why we do what we do with our stakeholders of craft beer in South Africa and integrating craft forms the core theme for this report – thereby brands within the broader commercial priorities of creating an opportunity to bring a balanced outlook NBL. For example, in the upcoming year, NBL South on a challenging year. Africa will focus on increasing awareness among 4 Sven Thieme Chairperson South African consumers of NBL’s craft brand, Camelthorn, which was relaunched in Namibia and South Africa in July 2017. In order to achieve our vision and actively live our purpose, we must continue to invest in NBL is one of the leading beverage manufacturing our brands and our people. Innovation and speed companies in Namibia. Heineken, as the world’s second largest brewer, therefore presents an of execution are essential to our success. opportunity for NBL to pursue its growth ambitions on a global scale. We are excited about the possibilities that this relationship will present in OPERATING PROFIT upcoming years. N$611 MILLION Read more about Heineken South Africa from page 56. 13% NBL recognises the challenges facing Namibia and continues to leverage its scale