Peter OBIORA, Online Editor at InvestAdocate in his usual manner captured the Q & A Session with the Executive Management of Nigerian Breweries Plc’s Pre-AGM Media Briefing held recently at Sheraton Hotels and Towers Lagos Nigeria: excerpts.

Contributions of acquired Sona Group in terms of profitability to Nigerian Breweries

We have already taken full control of Sona and Life Breweries; and have consolidated on the move. They were really part of Nigerian Breweries by October 2011 and brewed for three months. If you look at the Group Account which includes Sona Breweries, there is a difference; it seems that Sona Breweries may have lost. Its complete fact on paper, however, the real contribution of the Sona Group was that they provided enough capacity options for the Nigerian Breweries. So as soon as we took over, we looked at training people, we invested in repair and maintenance of facilities; it may appear that we made a loss on paper; but at the same time, the capacity have been upgraded; and we have already started using it to make a lot of money. So the growth that you see of Nigerian Breweries, the 25% of the revenue growth is also largely due to the Sona Group. Going forward, the Extraordinary General Meeting of shareholders that we held in the past month, shareholders approved the merger of Nigerian Breweries with Sona and Life Breweries.

FACTS CHECK:

“Nigerian Breweries Plc in its Audited Report for the Period Ended December 31 2011 made a Profit After Tax (PAT) of N38.025 billion in year 2011 end compared to N30.332 billion in year 2010 indication an increase of 25.5%”

EDITOR’s NOTE:

“Nigerian Breweries Plc December 2011 informed The Exchange that it has acquired Sona Systems Associates Business Management Ltd and Life Breweries Company Ltd.

By virtue of the acquisitions, Sona Systems and Life Breweries are now subsidiaries of Nigerian Breweries Plc. The two Sona Systems’ breweries in Ota and Kaduna as well as Life’s brewery in Onitsha have become part of the Nigerian Breweries family. Also, three brands, Goldberg (Lager), Malta Gold (Malt) and Continental Life (Lager) have been added to the brand portfolios of Nigerian Breweries Plc”.

Insecurity in Northern Nigeria and NB Plc ensuring a sustainable supply of raw materials

How much is our local input in our products? In terms of raw materials, basically we have about 60% local input and 40% is imported. In terms of packaging, we have about 80% local, it has to do with the way we account for things. The sugar we use for example for our Malta is considered as imported, but even more importantly, Nigeria does not have Barley, and we use Barley for our products and that is the element that we cannot substitute; if it is about going forward, we are using raw materials about 60% local and 40% imported, we are looking at how to increase the local content.

Competition and how to cope with them?

I believe the competition has only become fiercer and more intense in the last few years, what we see is bigger players in the Market like Guinness, SABMiller and Brewers of Castel Lager Beer, they are all investing in their brands and launching new products on propositions, in different categories, it could be Lager, Premium, Malta, Stout or Value for money and everybody is very busy in offering the Nigerian Consumer more choice in terms of brands, taste and price levels, all competitors are busy investing in future capacity. I am not going to explain what the competitors are doing in terms of capacity, they should do so themselves. As Nigerian Breweries, we are looking at growing the Market and building capacity. I think in the end, it is the consumer that makes the choice, if consumers turn towards choosing our Maltina, I think it is normal competition; as regards brand preference; like I said earlier, it’s the consumer’s choice.

On dividend NB Plc paid 354 Kobo and why did the Company change from its usual attitude of interim dividend

Let me refer to the Annual Report and AGM of 2010, in that Report and the AGM, it was already raised that the Company is seeking to expand its capacity and therefore will set aside some funds to achieve this; like the Chairman of the Company said in his Statement, the Company pays 100% and now there is the need to put some of the funds aside for capacity building; so we paid 60% of profit as dividend and 40% put aside for expansion of capacity.

In 2011, we did exactly the same, 60% of the profit for dividend payment and 40% for expansion. The N2.40 Kobo is not a mistake; the dividend paid in a certain year over the dividend declared over a certain year. To see the figures look at page 7 of the Annual Report. Declared dividend represents the final proposed for the preceding year; but declared in the current year.

In my view, the dividend policy in the past two years have been very consistent, because our profit have grown and we have been able to build capacity in 2011, we were able to grow our Net Profit by 25% and as a result the dividend of our shareholders have increased by 25% in 2011.

FACTS CHECK:

“The Directors of Nigerian Breweries proposed a final dividend of 300 Kobo per share on the issued Share Capital of 7, 562, 562, 340 Ordinary Shares of 50 Kobo each”

Source: (Nigerian Breweries Plc 2011 Annual Report and Accounts page 7)

On Corporate Social Responsibilities, you have no huge support for Nigerian Universities, What size of funding are you looking at in terms of research in Nigerian Universities?

As regards Nigerian Universities, if you look into our Annual Report, you will see all the investments we have made in terms of education, also we invest an annual sum on the development of education in Nigeria. For us we take a more holistic approach to it, because as you know, Universities are tertiary institutions and something comes before university education. So we start even from the beginning and that is why you will find in the Annual Report that we do a whole lot in supporting education even before the University level. In the Annual Report, you will find that a total sum of N55 million we spent in 2011 constructing school buildings, Libraries allover the country.

And we still continue with that even in 2012; so it’s an ongoing thing. Apart from donating school buildings, libraries and equipments to Secondary Schools, what we also do; which we started in 2011 is beyond the School project and programme. We go into these schools and have interactions with the graduating students, and we try to mentor them and channel their future in the right direction to universities.

However, if we want to look at what we do with the universities, it is quite a whole lot. I give you an example; we have only just concluded a project at the University of Nigeria Nsukka; where we donated a Science Laboratory from start to finish, worth at least N100 million, fully equipped and state-of-the-art science laboratory. If you also look at page 27 of this Annual Report, you will find that in 2011, we donated Laboratory equipments to the Obafemi Awolowo University Ile-Ife, Department of Crop Production; therefore, helping the University to build capacity for research in Crop Product.

Apart from these, we look at other areas as well, but in this particular instance it was on Crop Production. Again, we don’t limit it to just donating to these Universities, we also engage on the university campuses actively, not just for recruitment purposes, because we have a Campus Management Initiative, where we go round the universities; but also to guide career prospects and advancement; helping to advice these children on what it looks like out there in the world of work; because the world of education is so different from the world of work. For us what we do is not limited to Secondary Schools or Universities alone; but all encompassing.

In your Top Line, what was the percentage price increase relative to the size of growth in Turnover?

I think about five (5) to six (6) percent, this is due to price increase, and the rest is volume increase.

Will NB Plc reduce the size of Co2 per production or is your Company hoping to generate Co2 as a way of bringing down cost?

In terms of Co2, this is a project Indians have taught us everything that has to do with our product in terms of Co2 absorption or generation, the process includes tracking, packaging, raw materials, of all these elements, we try by efficiency programme to reduce the next Co2 level. It is a project that requires a lot of management attention.

Is there any plan to indigenise NB Plc Executive Management?

I want to be clear that we are proud to belong to an International Organisation, the Heineken Company. The Heineken Organisation is a very global business. It is very global not just in nature; of course with Dutch heritage. But in the management of the Company, it is a very global organisation and for global organisations, I think the emphasis is more on talent and people who can drive the agenda of the business. A good example is our parent organisation Heineken. Though based in Amsterdam and has a Dutch heritage, the CEO of the Company is Belgian; not even Dutch, the Global HR Director is American, the Global Commercial Director is of Lebanese heritage; so this is the way it goes for global organisations.

We are not too bothered if we don’t have a fully local Nigerian management; because we belong to an International Business. What is more important to us is that opportunities are also created for our own Nigerian Breweries Local Managers who have proved they can also compete on a global stage. I am very pleased to remind you again of some of the very good showings that we have had and we still has in this context. For example our people from Nigerian Breweries had in the past been the MDs of the Heineken operations in Ghana, Namibia and Sierra-Leone. We had a Nigerian as the Global Treasurer for Heineken based in Holland.

My colleague the Sales Director has been outside twice, he has worked in South Africa and the Americas, and I am also a living beneficiary of the same system. My last job before I came to assume this role three and half years ago, I was Regional HR Director for Africa and the Middle East based in Amsterdam, I was supervising the entire Heineken business not only in Africa; but also in North Africa and the Middle East. So it’s been on like that. Currently, as we speak, we have nine (9) Nigerians, highly placed in different Heineken operations in Amsterdam and other parts of the world, in the UK and in Africa. This is the way global operations go, and we do not want to pretend that we don’t belong in that global organisation. We have taken a whole lot of benefit by virtue of our presence in that global organisation. We have a good balance on the Executive Committee of Expatriates and Nigerians and we would like to keep it that way for as long as we also create global opportunities for our own people to go out and acquire skill in a matured Market and different environment; which eventually they will bring back home to run different functions in the organisation.

EDITOR’s NOTE:

“Nigerian Breweries Plc December 16 2011 notified the Nigerian Stock Exchange of the resignation of one of its Directors, Mr. J.C. van der Linden, with effect from 15th January 2012. This is to enable him take up a new position within the Heineken Group.

The Company has also appointed Mr. Walter L. Drenth as a Director to fill the vacancy created by the resignation of Mr. Linden”

Are you foreseeing a situation whereby the output of your Kaduna Breweries will affect your performance at the end of 2012 due to security challenges in Northern Nigeria?

We do not differentiate our various Breweries, it is a consolidated result. What is happening in the North, we share the concerns of the Nigerians about developments in the North and let’s hope that there would be a solution found very quickly. In terms of how it affects our business, the North is growing less fast than the other areas we see and this is affecting our business to a certain extent.

End