THE WORLD AS WE HAVE CREATED IT IS A PROCESS OF OUR THINKING... ANNUAL REPORT TWENTY THIRTEEN

Transcription

1 THE WORLD AS WE HAVE CREATED IT IS A PROCESS OF OUR THINKING... ANNUAL REPORT TWENTY THIRTEEN

2 IT CANNOT BE CHANGED WITHOUT CHANGING OUR THINKING. Albert Einstein

3 A POSITIVE ACTION DEVELOPS FROM A POSITIVE VISION Hendrik van der Westhuizen REPORTS 6 Company Profile 8 Financial Highlights 10 Directorate and Administration 11 Board of Directors 14 Senior Leadership Team 16 Chairman s Statement 21 Managing Director s Report 24 Sustainability Report 44 Remuneration Report 46 Corporate Governance FINANCIAL STATEMENTS 50 Group Salient Features 51 Group Value Added Statement 52 Five-Year Summary of Results 53 Summary of Statistics 54 Ordinary Share Ownership 56 Financial Review 57 Approval of Annual Financial Statements 58 Independent Auditor s Report 59 Report of the Directors 60 Statements of Financial Position 61 Statements of Comprehensive Income 62 Statements of Cash Flows 63 Statements of Changes in Equity 64 Notes to the Annual Financial Statements 101 Annexure A - Secured Interest-bearing Loans and Borrowings 103 Annexure B - Property, Plant and Equipment and Intangible Assets 106 Annexure C - Interest in Subsidiaries 107 Annexure D - Directors Emoluments 108 Notice to Shareholders 109 Proxy Form

4 Company Profile... COMPANY PROFILE Established on 29 October 1920, Namibia Breweries Limited (NBL) is one of the leading beverage manufacturing companies in Namibia and, indeed, in Southern Africa. In 1920, the Kronen Brauerei (Swakopmund), the Omaruru Brewery (Omaruru), the Klein Windhoek Brewery (Windhoek), and the Felsenkeller Brewery (Windhoek) were acquired by Messrs Carl List and Hermann Ohlthaver, who consolidated them to form South West Breweries Ltd. When, in 1967, South West Breweries Ltd acquired the Hansa Brauerei in Swakopmund, the company became the only remaining independent commercial brewery in Southern Africa. With Namibia s independence in 1990, South West Breweries Ltd changed to its current name of Namibia Breweries Ltd (NBL). Today, with the stated vision To Be the Most Progressive and Inspiring Company, NBL leads the domestic beer market and has a significant share of the premium beer category in South Africa. NBL s total exports account for more than half of total production output. In May 1996, NBL listed on the Namibian Stock Exchange (NSX) and became a publicly owned company. The Ohlthaver & List Group of Companies, a major Namibian group, is the controlling shareholder in NBL. In 2003, leading drinks company Diageo and brewer Heineken became NBL s strategic partners. Brandhouse Beverages (Pty) Ltd serves as the marketing vehicle for NBL s joint venture with Heineken and Diageo in South Africa. In 2008, the joint venture was deepened through the formation of DHN Drinks (Pty) Ltd in South Africa. This partnership has enabled NBL to further penetrate the lucrative South African market. At present, Windhoek Lager is brewed under licence in Gauteng for the South African market and distributed by DHN Drinks (Pty) Ltd. Brewed by choice according to the German Reinheitsgebot ( Purity Law ) of 1516, Windhoek Lager, Windhoek Light, Windhoek Draught and Tafel Lager enjoy a reputation of quality and purity for which the brands have earned international recognition including winning gold medals during the prestigious Deutsche Landwirtschafts- Gesellschaft (DLG.) Awards in 2005, 2007, 2008, 2009, 2010, 2011, and. The Ohlthaver & List Group of Companies launched a value system in 2004, known as Mwenyopaleka, which means rebirth in the local Oshiwambo vernacular. Mwenyopaleka embodies the Group s collective commitment to challenge our historic and cultural past to improve the future for everyone. As a member of the O&L Group, NBL adopted the Mwenyopaleka values, which aim to align Group activities. In 2011, NBL adopted the new Group purpose: Creating a future, enhancing life, which governs the strategic focus for the Group.

5 21.0% % 28.9% % % % OPERATING PROFIT MARGINS 16.4% % OPERATING PROFIT (N$ MILLION) 4.6% SOFTS 85.8% BEER 50.9% EXPORT 9.2% RTD s DIVISIONAL CONTRIBUTUTION TO REVENUE 0.4% OTHER 49.1% NAMIBIA GEOGRAPHIC CONTRIBUTUTION TO REVENUE 31 CENTS FINAL (Proposed) 31 CENTS INTERIM TOTAL DIVIDENDS PER SHARE DECLARED AND PROPOSED 62 (10.05.) CENTS 27 CENTS FINAL (23.11.) 27 CENTS INTERIM TOTAL DIVIDENDS PER SHARE 54 (11.05.) CENTS TURNOVER (N$ MILLION) BALANCED PORTFOLIO FINEST TAFEL LAGER TURNOVER (N$ MILLION) GROWTH IN TURNOVER 10PERCENT FINEST TAFEL LAGER WINDHOEK DRAUGHT OTHER WINDHOEK LAGER WINDHOEK DRAUGHT OTHER WINDHOEK LAGER 12 PERCENT GROWTH IN VOLUMES: NAMIBIA

6 Directorate and Administration... Board of Directors... DIRECTORATE AND ADMINISTRATION CHAIRMAN AND EXECUTIVE DIRECTORS EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS COMMITTEES 10 H van der Westhuizen Appointed to the Board as Managing Director on 2 April. BA Kidner 1 Appointed to the Board as Financial Director on 18 July Resigned on 17 September. G Mahinda 3 Appointed to the Board on 1 July Resigned on 17 September. E Ender Joined the Group in Appointed to the Board 1 February S Thieme Appointed to the Board in Elected Chairperson of the Board on 11 July NB Blazquez 1 Appointed to the Board on 2 September H-B Gerdes Appointed to the Board on 28 July P Grüttemeyer Appointed to the Board on 3 June C-L List Appointed to the Board on 28 June BHW Masche Joined the Group in Appointed to the Board on 28 June Resigned on 22 July. L van der Borght 6 Alternate Director to S Hiemstra. Appointed to the Board on 2 December S Hiemstra 5 Appointed to the Board on 31 August M Kromat 2 Alternate Director to G Mahinda. Appointed to the Board on 30 November DFM Leleu 4 Appointed to the Board on 2 April. L V McLeod-Katjirua Appointed to the Board on 2 April. Remuneration and Nominations Committee NB Blazquez (Chairperson) S Hiemstra (appointed 31 August ) P Grüttemeyer Audit Committee HB Gerdes (Chairperson) P Grüttemeyer M Kromat DFM Leleu ADMINISTRATION Company Registration Number 2/1920 (Incorporated in Namibia) 1979/001528/10 (Externally registered in South Africa) Secretaries Ohlthaver and List Centre (Proprietary) Limited Alexander Forbes House, Fidel Castro Street PO Box 16, Windhoek, Namibia Auditors Deloitte & Touche PO Box 47, Windhoek, Namibia Sponsor PSG Konsult PO Box 196, Windhoek, Namibia Transfer Secretaries Transfer Secretaries (Proprietary) Limited PO Box 2401, Windhoek, Namibia Principal Bankers First National Bank of Namibia Limited PO Box 285, Windhoek Attorneys Engling, Stritter & Partners PO Box 43, Windhoek, Namibia Sven Thieme Namibian Chairman Sven was appointed in March He is the Executive Chairman of the Ohlthaver & List Group (O&L). He joined O&L in 1998, after four years working as a Chartered Accountant in Luxembourg. He was also the architect of several joint ventures entered into by O&L, including the deal between Heineken, Diageo and Namibia Breweries. Hendrik van der Westhuizen Namibian Managing Director Wessie, a graduate of the University of Cape Town, has been with the O&L Group of Companies since In 2006 he was appointed to the board of Hangana Seafood (Pty) Ltd and became its Managing Director in He played an integral role in successfully placing Hangana Seafood (Pty) Ltd on the road of sustained profitability and has over 19 years of experience in the Food and Beverage Industry. Bruce Anthony Kidner British Finance Director Bruce joined Namibia Breweries in July 2008 as Finance Director. He is a qualified Chartered Accountant with a wealth of experience. Prior to his current role, he held the position of Finance Director at the Guinness Ghana Breweries Group in Accra (Ghana) and has been with Diageo Plc since Nationalities: 1 British 2 South African 3 Kenyan 4 French 5 Dutch 6 Belgian

7 Board of Directors Bernd Masche 2. Sijbe Hiemstra 3. Peter Grüttemeyer A registered professional engineer in South Appointed in August 2011, Sijbe has over Joined the Ohlthaver & List Group of Africa and Namibia, he joined Namibia 30 years experience and has held several Companies (O&L) in October 2003 as chief Breweries (then South West Breweries) in senior positions in the Heineken Group ranging executive officer where he is responsible for NON-EXECUTIVE September He was appointed as managing director of the company in 1982 and after having served 21 years in this position, from Portfolio Manager to Heineken Regional President Asia Pacific. Based at the Heineken Headquarters in Amsterdam, Sijbe also holds a formulating and executing strategy. He is a qualified Chartered Accountant and prior to joining O&L, he held the position of partner- DIRECTORS retired in September 2003, whereafter he was appointed as non-executive director in a consultancy capacity until October BBA degree from the Rotterdam School of Higher Education Studies. in-charge of the Deloitte Namibia practice. 4. Hans-Bruno Gerdes 5. Gerald Mahinda 6. Ernst Ender Managing partner of the attorneys firm Engling, Gerald Mahinda moved to South Africa as Ernst was appointed as executive director Stritter & Partners in Windhoek, Habo is also an managing director of Brandhouse, with in February 1983, he took over responsibility associate of the Institute of Chartered Secretaries effect from 1 July 2009 after successfully for the Company s export business as director: 12 and holds a B.Proc. degree from the University of Cape Town. He currently practices as a leading East Africa Breweries (EABL) for over ten years. He joined EABL as the group developing markets in Prior to his appointment in 1983, he held the position 13 commercial/corporate attorney, holds numerous finance and strategy director in 1999, a of manager: marketing & sales. Ernst retired directorships and is actively involved in the organised legal profession. Presently, he position he held until He rose to the position of group managing director in 2004, on 31 January 2008 but remains on the NBL Board as non-executive director. He was also serves as chairman of the audit committee. following a short tenure as strategy and appointed to the Ohlthaver & List Board in change director of Guinness Nigeria Plc. June 2008 as a non-executive director. 7. Carl-Ludwig List 8. Didier Leleu 9. Governor Laura Mcleod-Katjirua Born to Werner and Margarete List, raised Didier is a graduate of the French Business Governor Mcleod-Katjirua has a long history of in Midgard and schooled in Swakopmund, he School. He held the post of Finance Director serving the people of Namibia. She has been matriculated in Cape Town and completed his banking education in Germany in 1971 for Heineken France from 2003 until his appointment in as Senior Heineken active in the promotion of gender equality and education in Namibia. She is currently the after attending the University of Stellenbosch. Director Regional Finance Africa Middle East. Appointed Governor of Omaheke Region where After having devoted twenty years (1972- He sits on the boards of various she continues to support various initiatives that 1992) of his career to the Ohlthaver & List joint ventures and participations on support the development and wellbeing Group, he remains a dedicated director behalf of the Heineken Group. of Namibians. of the Group and Namibia Breweries Lieven van der Borght 11. Martin Kromat 12. Nick Blazquez Lieven holds Masters Degrees in Law and Martin holds a combined Master s degree in Nick is President for Diageo with accountability Business Administration from the Catholic business administration and electronic engineer- for Africa, Turkey, Russia, Central and Eastern University of Leuven, Belgium. With many years ing from the Darmstadt University of Technology. Europe and Global Sales. Prior to that he of experience within the Heineken Group and With 13 years experience in fast-moving led Diageo s businesses in Asia and held other reputable international corporates, he holds consumer goods with Procter & Gamble, he various other senior positions in Great the position of Heineken Regional Commercial brings a wealth of knowledge and insight to the Britain. He is also a non-executive Director Director Africa and Middle East. He also serves NBL Board and DHN Drinks (Pty) Ltd, the latter of Mercy Corps. He is the chairman of as a non-executive Director of Heineken Sirocco being where he currently serves as the Finance the NBL remuneration committee. Dubai and DHN Drinks (Pty) Ltd at present. Director.

8 Senior Leadership Team... SENIOR LEADERSHIP TEAM Hans Herrmann Supply Chain Manager Abrie du Plooy Supply Manager Hendrik van der Westhuizen Managing Director Bruce Kidner Finance Director Thomas Hochreiter Export Markets Manager Terence Makari Human Capital Manager Anton Goosen National Sales Manager Rosemary Shippiki National Marketing Manager 14 15

9 Chairman s Statement... CHAIRMAN S STATEMENT 16 GLOBAL ECONOMY Although the impact of the global financial crisis had been experienced in some economies as of 2007, in Africa, and in particular Namibia, the negative impact of the recession was delayed, and was only fully experienced in recent years. Around the world, stock markets have fallen, large financial institutions have collapsed or been bought out and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown has most certainly affected the livelihoods of almost everyone in an increasingly inter-connected world. For the developing world, the rise in food prices as well as the knock-on effects from the uncertainty and instability in international financial, currency and commodity markets, coupled with doubts about the direction of monetary policy in some major developed countries, have had a compounding effect and contributed to a gloomy outlook for the world economy. High fuel costs, soaring commodity prices as well as the oil price instability, amongst others, are some of the global economic challenges that have unfortunately impacted negatively on trade worldwide. As such, commodity-dependent economies like Namibia, have been exposed to considerable external shocks stemming from price booms and busts in international commodity markets. Market liberalisation and privatisation in the commodity sector have not resulted in greater stability of international commodity prices. There is widespread dissatisfaction with the outcomes of unregulated financial and commodity markets, which fail to transmit reliable price signals for commodity producers. In recent years, the global economic policy environment seems to have become more favorable to fresh thinking about the need for multilateral actions against the negative impacts of large commodity price fluctuations on development and macroeconomic stability in the world economy. Meanwhile, challenges to global growth remain high as recovery has proven more prolonged and challenging than any previous recession in the last century. A unique set of challenges and opportunities face businesses at the tail end of and as such critical growth factors in the near and long term include: 1) Fiscal challenges facing countries in the Organisation for Economic Co-operation and Development (OECD); 2) Deregulation and rebalancing in key sectors of developing economies; 3) Sectoral issues such as housing; 4) The uncertain longer-term effects of new monetary policies; 5) Commodity price uncertainty, including oil prices; and 6) Food inflation. On a positive note, growing strength in the US economy could spark a quicker-than-anticipated rebound in the global economic recovery. Furthermore, Africa s economic outlook for and 2014 is promising, confirming its healthy resilience to internal and external shocks and its role as a growth pole in an ailing global economy. It s agricultural, mining and energy resources, could boost the continent s economic growth and pave the way for a breakthrough in human development. Africa s economy is projected to grow by 4.8% in and accelerate further to 5.3% in GLOBAL BEER INDUSTRY was a year characterised by slower than projected Global growth, caused to a large extent, by subdued growth in several key emerging market economies, as well as the protracted recession in the Euro area. Despite the challenging environment within which we operate, I am pleased to report that Namibia Breweries Limited (NBL) delivered a solid financial performance, and is well positioned to continue benefiting from the growing demand for craft beer, as consumers shift to brands which satisfy their need for authenticity, tradition and genuineness. 17

10 Chairman s Statement... Chairman s Statement The global beer manufacturing industry has experienced declining per capita beer consumption across the US and European markets, as the overall beer market has reached a level of maturity, while growth in countries like China, Thailand, and India is average. At the same time, in emerging markets, rising disposable incomes and changing consumer needs, have brought about a rise in beer consumption, and strong volume growth. Across most markets, in the premium beer category, phenomenal growth has been experienced in the higher-value craft beer segment, and all indications are that this trend is set to continue. Globally, the beer industry has been facing major challenges resulting from increased costs of production, to declining consumer spending and rising levels of unemployment. However, with recovery from the global financial crisis, and reduction in unemployment, the beer industry is expected to witness considerable growth in upcoming years, with volume growth primarily driven by developing markets. In developed markets it is likely that the focus will be on premium brands, new variants and craft beers, as well as pricing. Together with increasing economies of scale and efficiency savings, these trends should ensure steady margin expansion and strong cash flow. O&L GROUP CONTEXT The Ohlthaver & List Group of Companies (O&L) - of which NBL is a subsidiary - is driven by its purpose Creating a future, enhancing life, which is further supported by Vision 2017 which is to be the most progressive and inspiring company. I am pleased to report that significant progress has been made in delivery against objectives as per the metrics defined in Vision 2017, and herewith wish to report on but a few highlights pertaining to the year under review. Having successfully entrenched our people management processes, and breakthrough leadership culture, I am pleased to report that we have also implemented a number of new initiatives such as our electronic recruitment system which has enhanced the efficiency and effectiveness of our recruitment process, while also creating a database of potential candidates and reducing our carbon footprint. NBL HIGHLIGHTS Despite the tough global economic climate which we continue to experience, I am pleased that NBL s performance has returned double digit growth in operating profit. Our brands and repute for quality and excellence, continued to gain popularity as we sustained our growth in overall sales, in both Namibia and South Africa, while making major inroads into our key markets. The new Windhoek Trade Mark that was launched in March continued to perform well, while contributing to the overall growth in volumes. This was further supported by the launch of a new TV campaign which was aired in South Africa and across the region. Namibia Breweries was awarded with the prestigious Gold Deutsche Landwirtschafts-Gesellschaft (DLG) award for four of all its brands, namely Tafel Lager, Windhoek Draught, Windhoek Lager and Windhoek Light in, again reaffirming our commitment to consistently delivering exceptional quality. The project to upgrade the brewhouse was completed in the first half of the financial year, and I am confident that we have now created sufficient capacity to support our export strategy going forward. I am pleased to report that during this year, we delivered the highest annual volume ever produced in the Windhoek Brewery, namely 2.6 million hectolitres (hl) of beer. In celebration of Namibia s 23rd Independence Anniversary, NBL presented our key stakeholders with our special Independence Lager - an exclusive Namibian beer brewed with our first ever homegrown malted barley. This is indeed a big milestone for us and has paved the way for further work to conduct larger scale trials that will determine the commercial viability of Namibian barley. These are but some of the many highlights that are testimony to our continued commitment to excellence. While we have initiated a number of efficiencies and cost savings projects, we have not compromised on quality, values or heritage, and have continued to deliver excellent value to all our stakeholders. As part of our commitment as a leading corporate citizen - committed to conducting business in a socially and environmentally responsible manner - we pride ourselves in having systems in place to minimise the potentially negative impact of our operations on the environment and on society. This saw NBL maintaining its position as the alcohol industry leader when it comes to promoting responsible drinking, as well as responsible conduct in the alcohol industry, through numerous responsible drinking initiatives. At the same time, in fulfilling our obligation towards making a valuable contribution to the society within which we operate, we continued to deliver a comprehensive corporate social investment programme which supports key national development areas. The Namibia Breweries Limited Board is committed to the highest standards of corporate governance. This report outlines the way the Directors control and govern NBL. Namibia Breweries Limited is subject to all legislation in Namibia as well as the listing requirements of the Namibia Stock Exchange (NSX). FUTURE OUTLOOK Moving forward we will continue to employ strategies and solutions that minimise the impact of the financial crisis to our businesses, while maintaining focus on further growing NBL and its distinctive quality brands. We are confident that we are in a position now, more than ever before, to grow and become a market leader beyond our home base Namibia, while continuing to deliver on our promise of quality and distinction. ACKNOWLEDGEMENT AND APPRECIATION I would like to acknowledge the deep commitment of our employees as they deserve our thanks for not only helping to deliver record financial results, but for their efforts in serving our customers and our communities with pride and passion. Their dedication to provide legendary service and to respond with overwhelming support to the needs of the communities within which we operate is highly commendable and deeply appreciated. I would also like to extend my profound appreciation to our shareholders, investors, the Government, our business partners, associates, customers and consumers, for their continued support. Your board remains committed, and we look forward to serving you in Sven Thieme Chairman 19 The O&L Group was awarded the overall 1st place in the and Deloitte Best Company To Work For survey in Southern Africa, as well as the 1st place as Best Company To Work For in Namibia, while also again being awarded the Seal of Service Excellence. This is an outstanding yet humbling achievement for us as we have retained our position as Best Company To Work For in Namibia for two consecutive years, but even more so, for being voted by our employees as the top company in the region, after increased stiff competition. This further shows the tremendous commitment and dedication we have to excellence in all our people management processes. As our business grows, we will continue to grow our people, and further enhance our employee s welfare, their capabilities, and their expertise and experience. The expansions included a number of greening initiatives, which, together with our continued focus on enhancing efficiencies, supported our sustainability agenda. Furthermore, the board approved the installation of a 1 MW on-grid solar photovoltaic (PV) facility that, once it has been fully installed towards the end of, will be the largest roof-mounted PV solar plant in Africa to date. Part of our strategy, as a member of the O&L Group, is to build innovative and sustainable businesses, which generate long-term profitability. As such, NBL had in 2011 commenced with barley trials to determine the feasibility of establishing a successful barley industry in Namibia, with the further aim of providing numerous employment opportunities and secondary benefits to our country, while meeting our own supply needs. We are inspired and determined to really create a breakthrough organisation where the highest level of affinity/connection, ownership and interdependence is evident in our people, products and services. As part of the O&L Group, with its vision to be the most progressive and inspiring company and its over-arching vision metrics of N$2 billion EBIT, a further 2500 employment opportunities, reducing its carbon footprint, as well as being a preferred employer of choice, we are set to achieve Vision While we expect the economic conditions in some of the markets in which we operate to remain challenging, I am confident that our management and employees will continue to deliver superior performance and continue to deliver value to all our stakeholders.

11 Managing Director s Report... MANAGING DIRECTOR S REPORT 20 I am pleased to report that, during the year under review, Namibia Breweries Limited (NBL) delivered another solid financial performance with an operating profit of N$500 million and revenue of N$2,383 billion, compared with the prior year s operating profit of N$429 million and revenue of N$2,160 billion. This translates to a healthy increase in operating profit of 17% and revenue increase of 10%. A 62c dividend per share was declared for the full year. This performance, despite the challenging environment within which we operate, is evidence that our 2017 breakthrough plan is delivering positive results. During, and again this year, NBL made major inroads into key markets and continued to grow overall sales in both Namibia and South Africa. In Namibia, the Tafel Lager brand continued to spearhead NBL portfolio growth and helped increase market share despite the size limitations of the domestic market. In response to consumer demands for convenience and value, NBL also launched a new Tafel Lager 440-ml can domestically. Windhoek Draught continued to perform well and contributed to the overall growth in Namibian volumes. Despite pressure from mainstream brands, Windhoek Lager maintained its positive contributions to sales in Namibia. In our export markets, growth rates varied, with the impact of restrictive legislation being felt most in Botswana, where alcohol levies rose beyond the 40% mark. In Mozambique and Zambia, Windhoek Draught did particularly well. DHN Drinks, our joint venture in South Africa, continued to grow its portfolio at single-digit levels despite the highly competitive environment. The Windhoek trademark delivered tremendous growth in South Africa, with the performance of Windhoek Draught 440-ml cans being one of the main contributors to surpassing the 1,000,000-hl mark in. The Windhoek trademark saw the launch of a new TV campaign which was aired in South Africa and across the southern African region. EVERYONE PURPOSEFULLY PRODUCING BREAKTHROUGH EVERYWHERE We also invested heavily in the training and development of our staff across the business in order to maximise their knowledge and expertise, develop job-specific technical skills, and enhance leadership capacity. In addition to the Ohlthaver & List Group (O&L) World Leadership Development Programme, we introduced the Leadership Foundation Programme and the Business Management Skills Programme during, which was successfully completed by 21 employees (14 completed the Leadership Foundation Programme and 7 completed Business Management Skills Programme). In and, the Ohlthaver & List Group of Companies was voted as the No 1 Best Company to Work For in Southern Africa and Namibia in the large category in the Deloitte Best Company To Work For (BCTWF) Survey. Employee engagement was and will remain an integral part of our strategy to entrench our values as defined in our Mwenyopaleka Programme, and to ensure that employees are fully aligned to our business objectives and purpose, and will continue to drive breakthrough performance during the next financial year. AMAZING EXPERIENCES, ENDURING IMPACT Following the major capital investments of 2011 and, I am pleased to report that further investments were made to extend the brewhouse and expand capacity, while further greening our operations. With all the investments to expand capacity completed during, I am confident that sufficient capacity has now been created to support our export growth strategy going forward. Vigo, NBL s new-to-world malt soft drink range launched in May, had a solid start and exceeded all expectations. In line with NBL s commitment to promoting responsible drinking and in response to consumer demands for premium low and non-alcoholic drinks, we will continue to innovate in this arena and deliver further value to our consumers. 21

12 Managing Director s Report... Sustainability Report Following on the successes of our brands in the 2010, 2011 and coveted Deutsche Landwirtschafts Gesellschaft (DLG) Awards, we are proud that our four key brands; Tafel Lager, Windhoek Lager, Windhoek Draught and Windhoek Light, all obtained gold medals at the DLG Awards, while Windhoek Lager, Windhoek Light and Urbock also won medals at the European Beer Star Awards in. A further development we are pleased to report on, is the newly introduced Sales Automation System, which supports our QDVP4 (Quality, Distribution, Visibility, Price, Promotion, Persuasion and Partnership) model, and enables us to continue delivering service excellence to our customers and consumers alike. In ensuring that we create further value to customers as well as promote responsible conduct in the broader liquor industry, we also work closely with the Namibia Shebeen Association to provide training and coaching aimed at uplifting standards and encouraging self-regulation in the informal liquor outlets known as shebeens. SUSTAINABLE EXECUTION IN EVERYTHING NBL is committed to operating its business in a socially and environmentally responsible manner, and has earned recognition as Namibia s alcohol industry leader when it comes to promoting responsible drinking and practising effective self-regulation. We continued to roll out the responsible drinking programme, DRINKiQ, amongst both our staff and external stakeholders, equipping them with facts about alcohol and encouraging responsible choices. We are particularly satisfied with the progress we made in greening our operations and supporting our sustainability agenda. In June, the NBL Board approved the construction of a major solar energy plant. Once it is complete, Namibia Breweries will have the largest rooftop solar plant in Africa. In terms of water, our usage per unit of beer increased slightly from 4.3 units of water per unit of beer in, to 4.5 units of water per unit of beer in. However, we are confident that we remain on track to our target of achieving below 4 units of water per unit of beer in the next four years. Our efforts to enhance our contribution to the society within which we operate saw another milestone being met after we successfully brewed the first-ever batch of beer from Namibian-grown malted barley in March, to coincide with the celebration of Namibia s 23rd year of independence. This was one of the highlights of the year under review, as the barley trials which commenced in November 2011 had now proved successful. This showed that there was merit in exploring the malting options available to NBL in its quest to establish a local barley industry that would have the potential to stimulate further job creation. In creating shared value for our consumers and celebrating national pride, we launched the third annual Windhoek Lager Ambassador Awards in September, which recognises Namibians who, like our Windhoek Lager brand, have achieved international recognition for their exceptional qualities. These individuals are nominated by the public as goodwill ambassadors for their efforts to enhance the lives of all Namibians. FUTURE OUTLOOK Despite the challenges the alcohol industry faces in terms of socalled sin taxes on alcohol, as well as restrictive legislation impacting on profitability, we believe the investments behind our brands, our production facilities and our staff, have paved the way for further growth. We are also confident that, amidst the increasingly competitive environment in South Africa, our joint venture, DHN Drinks, will remain important for growth in the beer portfolio. As such, going forward, we will transfer volumes to appropriate production sites to maximise efficiencies, while creating opportunities for further innovation and export growth. With regard to exports, we are excited about our new strategy by means of which we are focusing on growing four key markets in the southern African region by placing our own Market Managers in these locations, working closely with our distribution partners in-country, and providing further advertising and promotion investments behind our brands. With the new structure put in place to support our export markets, and a more focused approach to servicing our other trading markets, we are confident that our export strategy is well on track. We will continue to leverage our portfolio of premium beers, particularly the Windhoek trademark, but will also capitalise on new opportunities through innovations and renovations, exploring the growing craft beer segment at the same time, and responding to consumers ever-changing needs. We are confident that the business will continue to benefit from the investments made, and that this, together with the passion and commitment of our people to take this business to a new level, will ensure that NBL maintains its trajectory towards growth and prosperity. APPRECIATION I wish to express my sincere appreciation to the Board, our Chairman, the Management, and all the employees of Namibia Breweries Limited for their unrelenting dedication to Creating a Future, Enhancing Life. In addition, my deepest gratitude goes to our suppliers, customers and consumers for their ongoing support. Hendrik van der Westhuizen Managing Director A COMPANY IS ONLY AS GOOD AS THE PEOPLE IT KEEPS Mary Kay Ash 23

13 Sustainability Report... SUSTAINABILITY REPORT 24 As part of the O&L Group and inspired by our purpose of creating a future, enhancing life, Namibia Breweries Limited embraces its obligations as a corporate citizen towards the society within which it operates, as well as towards its shareholders, employees, stakeholders and the environment, and is therefore committed to operating its business in a sustainable way. Supporting initiative: Managing talent Inspired by our purpose of Creating a Future, Enhancing Life, the development and growth of our own and the nation s talents remained a critical human capital initiative for NBL. Our talent management strategy focused on talent attraction and acquisition, talent development and up-skilling, as well as succession planning. 25 OUR PEOPLE HUMAN CAPITAL PERSPECTIVE NBL s people-oriented strategy has been connected to the Group strategic focus area Everyone is Purposefully Producing Breakthrough Everywhere. This strategy was designed to achieve three key strategic outcomes, and has been supported by various breakthrough initiatives designed to realise those outcomes, namely: We continued to invest in people through various training opportunities such as generic interventions, specialised external courses, study loans granted, secondment to international assignments with our partners, internship opportunities, and the allocation of bursaries. A new breakthrough initiative launched during the year under review was the Basic Management Skills Programme for entrylevel managers. NBL has well-defined succession policies and retention strategies in place together with aggressive development programmes in order to ensure the readiness of successors and the retention of a high-quality workforce. Strategic Outcome 1: Everyone is deeply connected to purpose, lives the values and is proud of what they do. Supporting initiative: Excellent company climate The Ohlthaver & List Group was awarded the overall winner position in the Large Business Category of the and Deloitte s Best Company to Work For Survey in Southern African Development Community (SADC) and in Namibia. Through benchmarking our human capital practices against best practices of other companies, participation in this survey has enabled us to improve our human capital policies and procedures and to ensure that our people are connected to our purpose. The conferring of this award indicates that our people have recognised the improvements we have brought about, and that we are on the right path towards realising this strategic outcome. Strategic Outcome 2: Everyone is successful, thriving and making things happen in breakthrough mode. Supporting initiative: Leadership development As part of leadership development, Gap International a United States-based consultancy continues to provide support to the senior leadership team through its Performance Diagnostic tool. The team has benefited substantially by the acquisition of skills from this programme, which aims at improving business performance. The O&L World Programme is another breakthrough milestone that has made an enormous contribution towards building leaders within the business. This Programme was developed in-house, and aims at sharing the O&L history, purpose, values and leadership philosophy so that a collective mindset, behaviour and culture, are achieved, and leadership model competencies are entrenched within the organisation. O&L World is facilitated by the NBL Board Chairman and senior leaders, which is testimony to the importance the Group attaches to leadership development. NBL s overall Value Star winner for

14 Sustainability Report... Our People Strategic Outcome 3: Everyone is valued, recognised and appreciated for the difference they make. Supporting initiative: Talking to and rewarding our people Employee engagement and consultations are critical success factors for the realisation of our strategic outcomes. Employee engagement and communications were accomplished through the continuation of successful and thriving platforms such as Open Forum meetings, the MD s Road Show, Leadership/Shop Steward Meetings, Union Leadership Engagement Forums and the Affirmative Action Consultative Committee meetings. Our Mwenyopaleka Value Programme continued through various initiatives such as the Value Star Programme, Fun Days and the monthly newsletter. Reward programmes, such as Value Star, long-service awards, the short-term incentive scheme as well as the improved incentive scheme for the bargaining unit, were key initiatives with which we recognised and rewarded our people for the difference they made. New e-recruitment system In order for us to accelerate employee recruitment, reduce cost, broaden our pool of potential recruits and build a future database of applicants, we have finalised and launched the E-recruitment Portal. Through this portal, managers can also direct and monitor an employee s performance and development during his/her period of probation within the business. Furthermore, the portal provides opportunities to the business to migrate key Namibian talent across the globe and back home, and ease the skills shortage for highly specialised jobs within the market. ENGAGING OUR PEOPLE NBL realises that our employees are our most valuable assets. Therefore, we place great emphasis on employee engagement and communication. Testimony to our results in this regard is not only NBL s business performance, but also our outstanding achievement as the Best Company to Work for in Namibia and in the Southern African Development Community (SADC), as rated by Deloitte s Best Company to Work For survey in and. Our participation in the survey was not aimed at earning accolades, but rather at creating an opportunity for introspection and evaluation in order to gauge what our employees were experiencing in respect of working for us. We believe that, by creating an excellent employment experience, and effectively engaging our employees to be aligned to achieving our strategic objectives, we will continue to grow and sustain our business. Therefore, we live our value Let s Talk through various platforms. These include Open Forums and workplace forums, the MD s Road Show, Leadership/Shop Steward and Affirmative Action Consultative Committee meetings. Our various internal newsletters also contribute towards continuing to build a culture of open, honest and from-the-heart communication. Partnership relationship performance indicators A proficiency test is a method used to validate a particular measurement process. The artefact s reference is not known by the participating laboratory at the time of its measurement and, thus, the proficiency test is an excellent way to validate the laboratory s measurement process. NBL has been taking part in Heineken Proficiency Ring Testing over many years, namely Heineken Analytical Ring Analysis (HARA) and Heineken Microbiology Ring Analysis (HMRA). HARA s primary aim is to promote the quality of the analytical measurement of a range of components in beer for all Heineken-related brewery laboratories, while the primary aim of HMRA is to improve the quality of quantification and identification of a range of beer-related microorganisms. HARA and HMRA enable participants to demonstrate to their customers and Management the validity of their results, and they highlight opportunities for improvement of these analyses. Since December, NBL began participating in the Heineken Sensory Ring Analysis (HSRA) with great achievements. The primary aim of the HSRA is to support all breweries in the sensory recognition of a range of flavour components in beer. The sensory ring enables participants to demonstrate their ability to recognise components in beer, and reveals opportunities for improvement and targeted training. Below are NBL s proficiency test results, i.e. its First Time Right laboratory results, for. These results indicate that the laboratory has been excelling in the three disciplines of laboratory competency, as follows: Year to date January December Heineken Analytical Ring Analysis Heineken Microbiology Ring Analysis Heineken Sensory Ring Analysis 95.4% (Excellent) 94.9% (Excellent) 96.5% (Excellent) Zero accidents NBL is committed to ensuring a safe and healthy work environment for all. The health and safety of everyone who works at NBL, including at all our distribution centres around the country, depends on a general zero tolerance policy, based on ensuring the reliability of installations, machinery, adhering to safe working practices, health monitoring, and investigation of all cases of incidents or accidents. NBL understands that safety knowledge improves through ongoing training and awareness creation. Thus, we constantly invite employees to let us have their input on ensuring safety at work. At all our operations around the country, we are committed to providing a safe and healthy working environment through the implementation of our occupational health and safety policies and procedures, which are guided by legislation and international best practices. Our vision is to make and deliver our products with zero work-related injuries and illnesses on the part of our shareholders, contractors and other stakeholders. Our principal measure of health and safety performance is in the number of accidents which have resulted in days lost from work. As a point of increased concern and ongoing attention for us is the accident frequency rate which, over the reporting period, was 0.5 per 200,000 hours worked, resulting in a total loss of 68 days of work. All lost-time injuries were production-related and, as a result of investigations into these incidents, the application of safe work procedures was reinforced. As we do with all incidents, we learn from these events to help strengthen our programme going forward. We continuously strive to improve our safety and health programmes and records. We believe visible, demonstrated leadership commitment and a strong health and safety culture are key drivers of this improvement. In pursuit of this goal, we focus on reporting and data accuracy; constantly enhance safety training and the sharing of best practices; and intensify our campaigns on behaviour-based safety. Additionally, we continue to monitor the safety performance of our operations through routine internal and external audits of performance in terms of our own internal standards and requirements, as well as applicable laws and regulations. In an attempt to ensure health and safety information is communicated on various platforms such as our production areas, where the majority of staff work shifts, workplace forums are held on a weekly basis. This provides a fast-track communication vehicle to reach all those working on our premises. We use these forums not only to draw attention to specific health and safety issues and our performance record, but also to recognise achievements and positive behaviour. Our periodic health, safety and fire risk assessments also guide us in respect of measures that have been recommended in controlling identified hazards, selecting personal protective equipment, reviewing of written safe working procedures, promoting measures to reduce risk, and the interaction or consultation between Departments before commencing new projects or installations. The benefits of such a programme are endless. NBL s health and safety programme demonstrates that we are a company that cares. As a result, we enjoy improved staff morale, increased productivity, and reduced absenteeism. To the employee, it means a safe and healthy work environment, enhanced selfesteem, reduced stress, improved morale, increased job satisfaction, and increased skills and knowledge for the protection of their health and safety all of which lead to an improved sense of well-being. In addition, internal and external audits are conducted on a regular basis to indicate our level of legal compliance in respect of health and safety activities. Awareness sessions and induction programmes are in place to promote behavioural safety on our premises. Similarly, we regard the safety of contractors working on our site as being of vital importance. Contractor safety requirements, which are compulsory to any contractor performing work on our premises, make explicit provision for compliance with NBL s health and safety policies and national legislation. Monitoring workplace exposure and health A fundamental goal of our occupational health programme is to prevent occupational diseases by eliminating exposure to them, or by controlling such exposure to levels believed to be safe. Where hazards to health exist, they are measured, assessed in terms of their significance, and controlled at source. To determine the nature and extent of potential health hazards, an occupational hygiene survey was conducted to assess and control environmental factors and stresses arising in or from the workplace which might impair the health or well-being of our staff. The survey included the measurement and evaluation of noise levels, indoor and outdoor air quality, and the quality of illumination. To ensure potential hazards are properly controlled, baseline and periodic medical examinations are also conducted to monitor personal health in relation to exposure to job-related health hazards. Through this risk-based medical surveillance, we were able to assess each individual in respect of his/her fitness for the tasks being performed, ensuring their long-term capacity to work. During the period under review, almost 95% of our staff complement underwent the medical examination. With the information obtained from these examinations, we were able to establish an occupational health and wellness programme to suit the corporate health profile. In additional to previously identified occupational hygiene stressors, we realised there was a need to extend clinic services to include health screenings such as those for weight management, high blood pressure and unhealthy levels of cholesterol. Now, through regular monitoring and by means of awareness and educational sessions, we aim to change behaviour in order to manage the health and wellness of our employees through a holistic approach. 27

15 Sustainability Report... Our People Our absenteeism monitoring programme has also greatly contributed to being more proactive in identifying potential negative trends. As a result, the employees identified are expected to attend a counselling session. Having a system that assists us in accurately monitoring absences due to ill health has had only positive results, including an overall reduction in staff taking sick leave, and a resultant positive effect on costs to the company. In addition, we are now able to identify potential work process problems, trending analysis by absence type, Department, individual, or time-specific details. Dealing with growing workloads Occupational stress is not only related to what goes on at work: conflicts between the demands of the workplace and those at home are increasingly common. Indeed, a healthy balance between the working and personal lives of an organisation s staff is very important for its sustainability. Experience indicates that, if a person is not coping well, their health suffers; their relationships at work and at home become strained; and they become irritable, their concentration is compromised, and their judgment is impaired all of which normally lead to an increase in accidents and mistakes. NBL, through addressing the well-being of our employees, is able to maintain an environment that is conducive to building positive working relationships and identify employee concerns at an early stage. We support the well-being of employees by encouraging and promoting healthy lifestyles and team-building events to minimise stress. We also ensure that time cards are monitored strictly to minimise events where employees work overtime on a regular basis. Healthy employees NBL has realised that a workplace wellness programme is an investment in our most important resource: our people. While productivity and overall revenue are important, the bottom line of such programmes is that a healthy employee tends to be a happier and more productive employee. Indeed, employee welfare has a direct impact on a company s success. Programmes at our operations range from simply offering information to workers, to subsidising healthy lunches and providing fitness information. In addition, our canteen operations underwent a major facelift during the year under review not only in terms of newly installed equipment, but also by preparing meals that people consider to be healthier options. By providing employees with these services, we aim to improve their well-being and job satisfaction as well as raise our staff retention rate. Emergency preparedness Not only are we committed to promoting the well-being of all our staff, we also ensure a professional response to all emergency situations that could possibly occur. Having considered various scenarios, we have drawn up plans of how we will respond in different situations. In any emergency situation, having the basic knowledge or guidance of what is to be expected and to assist one in responding appropriately to it. Our objective, therefore, is to reduce the possible consequences of an emergency by preventing fatalities and/or injuries; reducing damage to buildings, machinery, equipment or product; and resuming normal operations after the event. Our emergency plan, which is revised on an annual basis due to the increased project activity on site, includes all possible emergencies, consequences, required actions, written procedures, and the resources available. We also have detailed lists of personnel, including their home telephone numbers, their duties and responsibilities, site plans, and large-scale maps showing evacuation routes and service conduits such as water and power lines. Furthermore, we ensure new employees understand their roles and responsibilities in the event of an emergency situation, and that they familiarise themselves with emergency escape routes, assembly points, and the location of emergency equipment. Due to the nature of our operations, we encourage employees to undergo first aid and fire-fighting training. We are proud to report that, in every area of work, on every shift, on any given day of the week, we have persons qualified and certified to attend to firefighting and first aid incidents. Our employees have received formal training in fire safety, during which time they receive information on how to prevent fires from starting as well as what actions to take if fire breaks out. In addition, we have persons equipped with the necessary information and equipment to apply first aid. We maintain good working relationships and ensure a close liaison with external organisations such as the Fire Brigade and its Emergency Services Department, and well as with government bodies such as the Ministry of Labour and Social Welfare and the Ministry of Health and Social Services. We encourage representatives from these offices to visit our premises on a regular basis to familiarise themselves with our set-up when there are any changes in our operations, and when we are in need of consultation in the event of new projects. With them being so actively involved, we are guaranteed that they are familiar with our site layout and can, therefore, assist us optimally in the event of an emergency. CORPORATE SOCIAL INVESTMENT We depend on all our stakeholders for our persistent progress and growth. Therefore, contributing to our stakeholders, in whatever form, ensures our continued survival and prospects as a business entity. Hence, corporate social investment is at once an investment in our own future as well. However, while our commitment to the society within which we operate is grounded on sound business principles, this is not what inspires us to continually understand our impacts on the environment and society, and ensure that we contribute in a meaningful way. Promoting responsible drinking As a caring corporate citizen, we not only believe in giving back to the community that supports us, but also ensure that we conduct our business in a responsible manner. Leading the responsible drinking agenda in Namibia, NBL was instrumental in establishing the Self-regulating Alcohol Industry Forum (SAIF) in Still today, NBL leads the alcohol industry in Namibia in promoting selfregulation, responsible conduct, and alcohol harm-reduction. Apart from maintaining existing responsible drinking programmes such as DRINKiQ and our Think Ahead Don t Drink and Drive Programme, NBL also extended its responsibility as a leader in this area by partnering with the Namibia Shebeen Association to conduct training and support capacity-building in the informal liquor outlet segment. Like bars everywhere, shebeens are often associated with various social problems. For this reason, NBL conducted training sessions for shebeen owners and their staff, not only to provide them with basic business skills, but also to encourage responsible business conduct and adherence to the law. With high rates of unemployment in Namibia and challenges in education, alcohol abuse is a symptom of various socio-economic problems faced by society. Therefore, strategic partnerships, wide stakeholder participation, and targeted interventions are essential in turning around harmful drinking patterns. It is this approach that also saw NBL partnering with the road safety fraternity, amongst others the Motor Vehicle Accident Fund, the Namibian Police and the City Police, which contributed to the success of NBL s Think Ahead Don t Drink and Drive Campaign. In creating ambassadors for responsible drinking and increasing the pool of knowledge on the subject, NBL continued to roll out the DRINKiQ Programme with key external stakeholders. These included health officials, law enforcers, Town Councillors, and social workers. NBL also continued to conduct the DRINKiQ Programme with all employees attending the O&L Group s Induction. Under the Chairmanship of NBL, SAIF also continued to grow, not only in terms of its membership base and effective self-regulation, but also in respect of harm-reduction interventions. SAIF has successfully created various platforms to stimulate balanced debate and cooperation amongst stakeholders in order to find solutions to key issues such as the legislative framework and ineffective law enforcement, to name but a few challenges. These initiatives and other efforts offering input to the National Alcohol Policy being drafted by the Ministry of Health and Social Services will continue as we strive to effectively address alcohol-related harm, and contribute to establishing a society that enjoys alcoholic beverages responsibly. Caring for our environment Mindful not only of the potential dangers manufacturing industries could pose to the environment, but also of the scarcity of production inputs, NBL continuously seeks ways to reduce its environmental impact and to enhance the sustainability of its operations. Therefore, as part of NBL s strategy to employ sustainable resource management practices, the business also continuously benchmarks its operations against similar-sized breweries globally by measuring and improving efficiencies on components such as water consumption, energy usage and packaging materials. The results of this commitment to sustainability have been that NBL is consistently amongst the top five breweries in its peer group in Africa. While NBL s commitment to the environment has seen the business invest in environmentally friendly practices for quite some time, particularly significant progress in greening operations was achieved in the past three years alone, through our various expansion projects. These included the installation of a new ammonia (NH3) cooling circuit and a new boiler system. These two measures enhance efficiency considerably while reducing NBL s carbon footprint. During the reporting period the Board also approved a further investment in a 1-MW solar power plant which will be installed on the rooftop of NBL s main plant. This will effect further reductions in NBL s carbon output. In addition to employing cleaner production practices, NBL has earned recognition as a leader in promoting environmental preservation beyond our operations by leveraging our role as one of Namibia s leading corporates. We work with numerous stakeholders in promoting natural resource management in the broader community as well as foster a sense of environmental responsibility. In this role, NBL has led a number of successful clean-up projects such as Project Shine, which has positively impacted the coastal regions of Namibia since 2007, and is still going strong. New initiatives such as the Fish River Canyon Clean-up to remove litter from the second largest canyon in the world were launched in. In addition to the continued success of recycling projects through the Recycle Namibia Forum, of which NBL is a founding sponsor and active member, NBL depots were also actively involved in supporting recycling efforts, mostly by individuals. These individuals regularly receive assistance with transporting their recyclables from various towns to buy-back centres in the city. 29

16 Sustainability Report... Sustainability Report... Caring for our community NBL is committed to contributing to communities by, among other things, hiring and procuring locally wherever possible. Therefore, we give preference to local businesses and small- and medium-scale enterprises, and are pleased to report that, with local procurement spend having amounted to more than N$575 million during the reporting period, NBL currently procures 30% of its goods and services from local suppliers. Great strides were made in the barley feasibility study initiated by NBL in 2010, which forms part of NBL s endeavours to add further value locally. Following the successful first trials to establish whether brewing barley could be grown in Namibia, larger-scale trials were 30 THE VALUE OF AN IDEA LIES IN THE USING OF IT conducted in to examine the commercial viability of such an enterprise. The harvest from two trial locations was then sent to Germany for malting, after which it was returned to Namibia. Soon, we had successfully brewed the first beer ever to contain Namibian-grown malt barley. This special brew, shared among various stakeholders, was extremely well received. The next phase of the feasibility study will focus on further commercial aspects of a local barley industry, including an analysis of the viability of various malting options. We are confident that, should NBL, with the support of its partners, be able to stimulate a successful barley industry in Namibia, numerous employment opportunities and secondary benefits will be created for the country. The Ambassador competition not only celebrates Namibians who have made a positive contribution to society, but also places the spotlight on deserving causes and charities, while supporting the efforts of the Namibian Government to enhance national pride. During the year under review, NBL continued to support various other social welfare causes such as the Organisation for the Empowerment of Widows/Widowers and Orphans of HIV and AIDS in Namibia (OEWONA), and the Dr Christina Swart-Opperman AIDS Orphan Foundation Trust (CSO), which provides children in various parts of the country with necessities such as food, shelter and clothing. With our support, the CSO Trust also enhances the well-being of these children by paying for their school fees, school uniforms and stationery, as well as by taking care of their health. This offers the children an opportunity to live a better life, despite the fact that many of them have lost their parents due to HIV and AIDS. NBL staff also volunteered their time and energy through projects such as the Christmas Tree Initiative for Orphans and Vulnerable Children (OVCs), which entailed making up gift boxes, and the Cancer Apple Project, which raises funds for the Cancer Association of Namibia (CAN) throughout the year. Furthermore, NBL continued its longstanding commitment to the CAN by sponsoring their awarenessraising activities aimed at combating the spread of cancer through early detection and prevention, as well as the AB May Cancer Care Centre, the country s only dedicated oncological treatment facility. Thomas Edison 31 In 2010, the year that saw Namibia celebrate its 20th anniversary of independence while NBL toasted to its own 90th birthday, we launched a national pride programme aimed at recognising and celebrating remarkable Namibians, who, like the Windhoek Lager brand, have achieved international recognition for their exceptional qualities. Since then, each year an individual has been recognised as a top achiever and lauded for his or her contribution to enhancing the lives of others. The third Windhoek Lager Ambassador initiative was launched in, and was extended to engage the public in garnering nominees for the awards. The following categories of award applied: Education Community development Sport Health Science Technology Business success Conservation, and The arts. Stakeholder communication and relationships In living our value, Let s Talk, we continuously engage in dialogue with our stakeholders and embrace the notion of co-creation by considering the views of all role players in informing our decisions and shaping the future. Strong relationships are, therefore, at the heart of all our success. We believe that, in order to develop joint solutions, healthy relationships are essential in sharing knowledge and expertise, and creating value for all. NBL has also made significant progress with new initiatives, such as our barley project and the solar project. Projects such as these offer opportunities to nurture excellent stakeholder relations, and cooperation with and amongst our partners has delivered favourable results for all.

17 Sustainability Report OUR ENVIRONMENT CONSERVING OUR ENVIRONMENT To waste, to destroy our natural resources, to skin and exhaust the land instead of using it so as to increase its usefulness, will result in undermining in the days of our children the very prosperity which we ought by right to hand down to them amplified and developed. Theodore Roosevelt Environmental conservation is the careful use of natural resources to ensure that there is enough for the future, while ensuring that damage to the environment is minimised. Environmental problems such as the depletion of natural resources, water pollution and global warming have all resulted mainly from human activities. Conservation also involves minimising the negative impacts caused by these environmental problems. As citizens of the world, each of us is responsible for the health of our planet. Our choices and our actions contribute to the well-being or deterioration of the environment. It is our Earth the only one we have. Thus, conserving the environment is one of the single most important things that people, companies and countries need to do in their day-to-day lives and operations. Environmental sustainability involves making decisions and taking action that are in the interests of protecting the natural world, with a particular emphasis on preserving the capability of the environment to support human life. It is an important topic today, as people are realising the full impact that businesses and individuals can and do have on the environment. state of our environment is influenced by our behaviour, and that we have the opportunity to make an impact on the future. Consideration is taken in various areas such as water conservation, energy efficiency, waste reduction and reducing our carbon footprint in order to lessen the impact our business has on the environment. In addition to the programmes and tools we have developed to reduce our environmental impact, we also monitor progress on actions and promote good practice. Our energy and waste programmes, for example, consolidate key data on waste, energy, and water use in an effort to reduce consumption across the company. We have also developed a tool to measure our carbon footprint. Two of the factors that play a huge role in our business are water and energy. Water is vital to our business and it is one of the main ingredients in our products. It is also used in our manufacturing process. Water is also essential to sustaining every community in the world. We practise our water stewardship in various areas: we reduce our water use ratio (efficiency), and recycle the water used in our operations (wastewater treatment). Water will always be important to our company and country, and we are continually working to reduce our impact and minimise our use. We use energy for heating and for power throughout the brewing and packaging processes. Therefore, the availability and affordability of fuel is vital to our business as is the availability of electricity in the bottling and fermentation process. 33 We at NBL consider it our duty to look after our environment. Thus, we take our environmental responsibility very seriously. We continually enforce the concept amongst our employees that the

18 Sustainability Report... Our Environment GO GREEN! Going green is trending worldwide, from food manufacturers to financial institutions, as more and more people take on the responsibility for preserving our environment. When one considers the costs and benefits of going green, perhaps the best place to start is with an understanding of what is meant generally by the phrase. Environmentally friendly activities have been popular for many decades, to conserve energy, reduce pollution and save money. The drive for the more recent green movement came from the theory that the human-generated release of carbon dioxide into the atmosphere was contributing to an increase in temperatures across the entire planet. These concerns caused some governments, businesses, and individuals to re-examine their own roles in the release of carbon dioxide and to attempt to reduce their output of this gas. When we speak today of going green, we generally refer to something broader than global warming. What is usually meant is a heightened awareness of using the Earth s resources more efficiently. The term today includes efforts to conserve our natural resources, reduce our contributions to landfills, and reduce pollution generally. Going green, can be summarised with the words reduce, reuse, recycle which means reduce waste, reuse whatever materials you can, and recycle what you can. The goal of the NBL Environmental Management System is to improve our environmental performance. This means we focus on optimising our water consumption optimising our energy consumption recovering our carbon dioxide managing our waste, and innovating our packaging materials and methods. Projects in this regard that were completed during the reporting period, and new projects that will carry over into the coming financial year, are as follows: A new water treatment plant, comprising ultrafiltration and reverse osmosis for producing high-quality water and improved water usage A new ammonia-based cooling plant, with improved cooling and process efficiencies Upgrading of the brewhouse for more efficient and flexible processing Upgrading of the carbon dioxide recovery plant, and Construction of a solar energy plant. Water treatment Aerial view of the NBL main plant Brewhouse Manufacturing Execution System Project In 1986, NBL built a new brewery at its Iscor Street premises in Windhoek. With a planned yearly output of barely 500,000 hl, together with a brand-new Siemens-automated brewhouse, it was the pinnacle of brewing technology in Africa at the time. Since then, NBL has undergone massive development, without having removed the original production facility. Thanks to countless subsequent modifications, extensions and redesigns, the brewery is still at the forefront of brewing technology, but it now produces five times its original capacity, namely 2.6 million hl per year, with the capacity to reach 3 million hl and beyond. With a portfolio of 78 individual stock-keeping units (SKUs), managing this complexity and scale effectively is simply not humanly possible. NBL has, therefore, embarked on implementing a manufacturing execution system (MES) aimed at providing up-to-date information on the performance of key processes, enabling Management to make the right decisions right when they are needed, e.g. decisions that can save the company money, conserve already scarce water resources, and reduce the load on an already stressed electrical energy grid. The MES will also tie into laboratory operations, allowing closer integration of the quality control and production processes. True to the vision of being the most progressive and inspiring company to work for, NBL is using in-house talent to develop an MES that is tailor-made to serve our needs. Environmental performance indicators Indicator Unit Target FY FY Water (hl/hl produced) Industry Average Electricity (kw/hl produced) Not available Thermal energy (mj/hl produced) Global Standard Table 1: Environmental performance indicators Water usage For the year under review, we used 4.5 units of water to produce each unit of beer. This is slightly higher than in previous years, although still below international benchmarks. An increase in customer and consumer demand has pushed NBL to produce at its maximum capacity, whilst still maintaining flexibility. However, doing everything humanly possible to meet customers expectations has its cost; nonetheless, with the new possibilities in measurement available through MES, what we measure, we can manage. NBL remains committed to its 2017 goal of 4 units of water per unit of beer. Electrical energy usage The reporting period saw electrical consumption registering at 8.3 kwh per hectolitre produced also slightly higher than in the previous financial year. A major driver of consumption is the beer clarification system, as well as production pressure created by constant demand for our extensive 78 SKU portfolio which resulted in poorer efficiency of power use, due to regular changeovers. Looking forward, MES-driven data will allow for more effective control of tank cooling, beer clarification and therefore packaging line efficiency the major users of electrical energy in a modern brewery. Thermal energy usage The financial year under review saw 68.4 MJ of thermal energy used per hectolitre produced. This is well below industry benchmarks. The good performance of the previous reporting period was sustained, and will be maintained while we continuously aim to improve on this figure. Non-recycled waste With only 200 g of non-recycled waste generated per hectolitre, NBL is an industry leader. Over 80% of all inorganic waste produced on site is recycled. Organic solid waste from production operations, i.e. spent grain and used yeast, are sold as valuable animal feed. Reduce Reuse Recycle: The treatment of waste at NBL REDUCING WASTE Waste reduction at NBL is facilitated by constantly monitoring wastage such as beer losses, as well as the usage rates of packaging material cleaning agents raw materials, and water. Whilst the increase in complexity of the brand portfolio and demand for our products has made packaging difficult to manage, losses experienced in packaging materials remain within industry norms. The packaging loss of returnable bottles registers at only 1%, which is well below industry norms. As regards its use of low-waste packaging materials for nonreturnable bottles, NBL has switched over from pallet wrapping by stretch film to pallet shrouding by stretch hoods. Pallet shrouds add more stability to a pallet of full product than stretch film, resulting in fewer losses of product. The rolls of stretch hood are also more efficiently utilised by the palletisers than stretch film. In addition, the shrouds are easier to recycle than the wraps. The mainstay of our product portfolio is the 750-ml returnable bottle, with its low environmental impact. The new shape of the bottle, which was implemented in 2010, has proved even after only three years to be more resilient to external damage such as scuffing, than the older bottle, resulting in fewer losses. Over the last two years, the consumption of cleaning agents has also been reduced by 15%. Reducing water losses and beer losses remain a focus for the future. 35

19 Sustainability Report... Our Environment... REUSING WASTE One of the most important resources in a brewery that can be reused is water. In, NBL started installing a water reticulation system in packaging which will allow rinse water from returnablecontainer rinsers to be used as cleaning water elsewhere in the packaging cycle. 201 In other cleaning systems throughout the brewery, the last-rinse water of cleaning operations is mostly reused as the first-rinse water in the next cleaning operation. 192 Spent grain from the brewhouse is reused as nutrient-rich animal feed. 36 Sugar used for the production of carbonated soft drinks is supplied in 1-t bags. The bags are returned to the supplier, who reuses them. The main cleaning agent used is lye (caustic soda). This is used in cleaning-in-place (CIP) systems. The lye is reused until it loses its effectiveness, after which the lye is pumped into a sedimentation tank. There, the dirty sediments settle and are removed. The remaining liquid is still usable: it is refreshed with new lye to the correct cleaning concentration, and reused. RECYCLING WASTE An accredited waste contractor removes and sorts waste for recycling at NBL. Much of the waste is already sorted on-site into plastic, glass (where possible, already colour-sorted), steel, aluminium and paper. Over 80% of all inorganic solid waste produced on-site is recycled in this manner. Figure 1: Non-recycled industrial waste per 1,000 hl produced (kg) Reducing environmental impact EFFICIENT CARBON DIOXIDE RECOVERY Carbon dioxide is produced as a natural by-product of fermentation. At NBL we collect, purify and reuse this gas for filling beer and to produce carbonated soft drinks and ready-to-drink alcoholic beverages. In order to accommodate the increase in beer production, the outdated carbon dioxide recovery plant is being replaced with a modern, efficient and environmentally friendly plant, with an additional 98 t of storage capacity. Thus, instead of releasing the harmful gas into the atmosphere, NBL can recover and store carbon dioxide for use in other areas of production or sell it to other companies who need a high-quality form of the gas. 37 NBL is a founding and active member of the Recycle Namibia Forum, which vigorously promotes recycling throughout the country. The waste contractor also provides what it calls File 13 containers for offices in NBL, where paper waste is collected for recycling. EFFICIENT HEAT ENERGY USAGE During the year under review, the brewhouse was upgraded. Part of this upgrade entailed the installation of internal boilers in the wort kettles. This change has brought with it some reduction not only in the use of heat energy in the brewhouse, but also, therefore, in the consumption of fuel used to create this energy. Lower fuel usage means lower carbon dioxide emissions which reduces NBL s carbon footprint. Hazardous waste Non-recycled organic industrial waste Non-recycled waste to landfill Recycled industrial waste Recycled organic industrial waste REDUCING THE CARBON FOOTPRINT OF INCOMING MATERIALS One of the main contributors to a manufacturer s carbon footprint is the transport of incoming materials and of outgoing finished product. Thus, every effort is taken to maximise loads and, once the trucks have distributed finished product, to have them return with new packaging material or empty returnable bottles and crates. Figure 1: Waste type Lautertun Tank in the Brewhouse

20 Sustainability Report... Sustainability Report Another innovation is the use of Namibian-grown barley. In partnership with the Faculty of Agriculture and Natural Resources at the University of Namibia, NBL is assisting with efforts to grow barley in Namibia under various irrigation schemes. After this barley was harvested, it was specially malted for us in Germany before being used. In March, an Independence Lager, brewed with Namibian malt barley, was produced. The quality of the beer was consistent with that brewed with solely European malt barley. By sourcing raw materials from local suppliers rather than from overseas, the environmental impact of transporting raw materials to production sites is greatly reduced not to mention the social benefit of creating more livelihoods for local farmers. REDUCING THE IMPACT OF EFFLUENT Effluent at NBL is collected in large tanks. There, its power of Hydrogen (ph) and temperature are balanced out, and solids are removed. Only then is the effluent released into the City of Windhoek s effluent stream, thus reducing the impact on the environment. Using cleaning materials efficiently and reducing product losses also means cleaner effluent. In addition, NBL uses disinfection media such as peracetic acid and hydrogen peroxide, which naturally break down into water and dissolved carbon dioxide and, thus, have no environmental impact. CARBON FOOTPRINT: SOME DEFINITIONS AND EXPLANATIONS the total sets of greenhouse gas emissions (such as carbon dioxide and methane) caused by an organisation, event, product or person. 1 a measure of the total amount of carbon dioxide (CO2) and methane (CH4) emissions of a defined population, system or activity, considering all relevant sources within the spatial and temporal boundary of the population, system or activity of interest. Calculated as carbon dioxide equivalent (CO2e) using the relevant 100-year global warming potential (GWP100). 2 One s carbon footprint measures the total amount of greenhouse gases emitted as a result of one s daily activities and processes. This includes collecting and delivering raw materials, processing such materials, and transporting finished products to customers. All of these processes require energy and, if this energy is derived from burning fossil fuel, it creates a carbon footprint. THE ONLY WAY TO DISCOVER THE LIMITS OF THE POSSIBLE IS TO GO BEYOND THEM INTO THE IMPOSSIBLE Arthur C. Clarke 39 REDUCING THE IMPACT OF ENERGY GENERATION A 1-MW photovoltaic solar power plant has been commissioned, and construction will start on it in the second half of. Covering the roof of the packaging hall, this plant will provide up to a third of NBL s electrical power needs, significantly reducing both cost and environmental impact, whilst reducing the strain on Namibia s power grid. 1 Carbon Trust (2009); cited at Carbon_footprint, last accessed 16 August. 2 European Rental Association (); available at -%20FAQ%20Carbon%20Footprint.pdf; last accessed 16 August. The possibility of reusing spent grain as an energy source is also being investigated. Looking back at the year under review, NBL has had a tough time managing the demands of its customers whilst still running a low-carbon-footprint and water- and energy-efficient production facility. We will continue to seek further opportunities to improve efficiencies.

21 Sustainability Report BRANDS, GROWTH & FOCUS OUR AWARD-WINNING BRANDS AND OUR PASSION FOR EXCELLENCE Consistent quality leads to winning brands NBL does not compromise on quality as only consistent quality and excellence will guarantee the long-term success of NBL beers in the market locally and beyond. This great commitment and workmanship has resulted in numerous awards for NBL brands. The following were the most notable recent achievements: Namibia Breweries Limited Recipient of a Bronze Medal Best of the Best, for Sustainable Quality in the DLG Awards having achieved above average results for 5 uninterrupted years being 2008, 2009, 2010, 2011 and. Windhoek Lager Winner of a Gold Medal at the 2007, 2008, 2009, 2010, 2011, and International DLG Awards as well as a Bronze medal at the European Beer Star Awards. Windhoek Light Winner of a Gold Medal at the 2005 Brewing Industry International Awards, and winner of a Bronze Medal in 2007, a Silver Medal in 2006, 2010, 2011 and, and a Gold Medal in at the International DLG Awards Windhoek Light Winner of a Silver Medal in the category German-style Leicht Bier (Light Beer) at the and European Beer Star Awards in Nuremberg Windhoek Draught Winner of a Silver Medal at the 2006 International DLG Awards, and Gold at the 2007, 2008, 2009, 2010, 2011, and Awards Windhoek Draught Winner of a Silver Medal in the category European-style Mild Lager at the European Beer Star Awards in Nuremberg Tafel Lager Winner of a Silver Medal at the 2006 International DLG Awards, as well as Gold at the 2007, 2008, 2009, 2010, 2011, and Awards, and Tafel Lager Winner of a Gold Medal in the category European- Style Mild Lager at the 2008 European Beer Star Awards in Nuremberg. Urbock Winner of a Bronze Medal at the European Beer Star Awards in Nuremberg QUALITY TO OUR CONSUMERS NBL is dedicated to the highest quality in all the work we do. Quality is the uncompromising standard for our actions, and it flows from our passion and our pride in being part of the O&L community. Quality work, which results from our personal efforts, is the first ingredient of quality brands and the source of our reputation for high standards. As a sustainable business, we understand that consumers must trust NBL and the quality of our brands. Therefore, our NBL Quality Policy commits us to delivering quality products and services by doing the right things right the first time, and every time. The quality of our products and services has always been one of our company s key values; hence, NBL is committed to deliver quality products and services by striving to continuously exceed the expectations of our consumers, customers and stakeholders continuously improving our products, processes, procedures and methods, and providing our employees with a suitable work environment, infrastructure and adequate resources to complete their work with the highest proficiency and to enable them to develop their skills to a competent level. NBL is forever striving to produce quality products that are not only safe for consumption, but which also meet the needs of our consumers and the expectations of consumers. We do so by being fully compliant with the Hazards Analysis and Critical Control Point (HACCP) South African National Standard (SANS) 10330:2007 on food safety. 41

22 Sustainability Report... >>>>>>> 42 The relationships we develop with consumers are based on trust. We also strictly ensure that we only target and sell to people over the legal purchasing age. NBL prides itself in having stringent testing on all its raw materials as well as in-process and final products to ensure that only the highest quality raw materials are used and that all processes yield a high quality liquid that will be enjoyed by our consumers. Therefore, to fulfil consumer expectations, NBL s standards are designed to detect and address all defects through its quality management systems. Our quality standards are measured internally through packaging defects, and externally through customer and consumer complaints. Packaging defects and complaints are investigated thoroughly and used to eliminate future problems. We focus on quality through our quality management system, which aims to ensure, among other things, that our people are properly trained, their responsibilities as regards vouchsafing quality are clear, quality is monitored, and targets are set for improvement. Our brands are enjoyed across the globe. We currently export worldwide to countries like Australia, Germany and the United Kingdom, as well as to countries on the African continent, including Angola, Botswana, Cameroon, Kenya, Mozambique, Uganda and Zimbabwe. OUR BRANDS IN PERSPECTIVE February will go down in the chronicles of history as the month that saw the first beer brewed with our locally grown barley. The barley was malted in Germany and shipped back to Namibia for brewing. The limited edition Independence Lager was produced in celebration of this important milestone in the history of NBL and Namibia as a country. This special Independence Lager presented to various stakeholders, including shareholders; government offices, ministries and agencies; our customers; and captains of various industries with whom we could share our story and the importance of growing barley in Namibia. This special brew was received and savoured with immense pride amongst the selected recipients who shared gratifying feedback on the high quality and exceptional taste of the beer that had been brewed using locally grown barley. The nod of approval from these esteemed recipients was a critical watershed in the phase of this project and its benefits not only to NBL, but also to the economic independence of the Land of the Brave by bolstering the critical agricultural sector of our county. As a consumer-centric organisation, NBL continues to create amazing experiences with its innovations. The success of Vigo is a clear demonstration of the importance of being one with the consumer, and relentlessly unpacking consumer insights. Vigo, NBL s non-alcoholic malt-based beverage, continues to enjoy phenomenal success, surpassing initial projections by 100% by the end of the financial year under review. The overwhelming customer and consumer response is ascribed to the unparalleled quality of both the intrinsic and extrinsic properties of the brand. In creating enduring consumer experiences, Vigo launched multiple campaigns using both traditional and digital media, and the brand now boasts first place in Namibia with Facebook likes of over 20,000 within a period of seven months clearly authenticating consumer approval. Tafel Lager continues to reap benefits from a hugely successful and emotive National Pride campaign an advertising idea that has outstripped expectations in distributing the brand energy to customers and consumers alike, and which has resulted in the brand recording a double-digit volume growth. As the biggest mainstream brand in Namibia, Tafel Lager commits to accessibility in all channels and in formats that are suitable for all drinking occasions. To keep the brand relevant and in line with the international consumer trends, Tafel Lager extended its offering into a 440-ml can which was launched to market in April. Tafel Lager adorers now have their favourite brand in yet another affordable and convenient pack. Faced with affordability challenges in its key export markets, NBL launched a fully recyclable one-way keg solution which was aimed at profitably accessing the Botswana draught-on-tap market. This oneway, non-returnable keg was launched in Botswana in September with an initial installation of 40 units in selected outlets. This innovation allowed consumers to experience the highest quality Windhoek Draught on tap at an affordable price. After extensive research, NBL launched a new and compelling communication platform for Windhoek Lager and Windhoek Draught on the African digital satellite television service provider DSTV. The Made of the Right Stuff campaign is deeply rooted in the Windhoek trademark values of authenticity and character. Although the campaign was only launched at the end of, it has already resulted in a significant increase in the Windhoek trademark brand s equity, and is expected to further cement Windhoek s positioning in the premium beer segment. In summary, we have highlighted a number of projects which shows that being part of the O&L Group, NBL is committed to its purpose of Creating a Future, Enhancing Life, and will continue to innovate, collaborate and invest in preserving Namibia s beautiful environment for generations to come. Water Treatment Plant 43

23 Remuneration Report... Remuneration Report REMUNERATION REPORT THE REMUNERATION AND NOMINATIONS COMMITTEE The Remuneration and Nominations Committee is a formal NBL Board Sub-committee. This report and its recommendations were approved by the NBL Board. During the year under review, no Remuneration and Nominations Committee meeting was held. Composition of the Committee For the year, the following Non-executive Directors were members of the Committee: Mr Nick Blazquez (Chairman) Mr Sjibe Hiemstra (appointed 31 August ), and Mr Peter Grüttemeyer. The Managing Director and the Manager for Human Capital are also invited to meetings in an advisory capacity, except when their own remuneration is discussed. From time to time, independent remuneration consultancies are instructed to provide advice on executive remuneration matters to the Committee. The Commitee s responsibilities are set out in its Terms of Reference, as approved by the Board. Remuneration - To monitor the Company s remuneration policy, including policies relating to: - parameters used in determining senior leadership remuneration scales - executive remuneration, including remuneration packages for Senior Management - the structure of the remuneration of Executive Directors, Nonexecutive Directors, the Chairperson and, where applicable, Board Committee members - the design of executive incentives, inclusive of the Board criteria on which performance-related elements are based with regard to the trading period, if applicable, and - senior employee recruitment, retention and termination - To ensure that there is a formal, transparent and objective method to recommend to shareholders regarding Director remuneration packages, including pension benefits - To ensure that the fees paid to Non-executive Directors are a fair reflection of the contribution they make to the company - To advise on, and monitor, a suitable performance-related formula, inclusive of the Board criteria on which performancerelated elements are based with regard to the trading period, if applicable, and - To separate the review and recommendation of Non-executive fees from the review and recommendation of Executive remuneration, each with its own motivation and basis for the recommendation. Nominations - To ensure a formal and transparent process for the appointment of new Directors to the Board. In fulfilling this function, the Committee is required to: - assess the necessary and desirable competencies of prospective Board members based on merit and objective criteria. In doing so, candidates from a wide range of backgrounds are to be considered, in keeping with the dynamics and diversity of the country - review Board nominations from shareholders and to provide recommendations to the Board in respect of such nominations - ensure that, on appointment to the Board, Non-executive Directors receive a formal letter of appointment setting out clearly what is expected of them in terms of their time commitment, Committee service (if any), and involvement outside Board meetings - define and implement procedures for the annual statement of disclosure of any conflict of interest and the annual statement of compliance - give full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing the company and, therefore, what skills and expertise are needed on the Board in the future - keep under review the structure, size and composition (including the skills, knowledge and experience) of the Board, and make recommendations to the Board with regard to any changes, subject to the provisions of the company s Articles of Association and the Companies Act, 2004 (No. 28 of 2004) - consider and, if appropriate, make recommendations to the Board regarding: - the tenure of Non-executive Directors on the Board, and - the reappointment of any Non-executive Director at the conclusion of his or her specified term of office - approve and, if in the interest of the company, ensure that all employment agreements between the company and the Directors are limited to three- or five-year periods, if applicable, provided such agreements are renewable, and - action any other duties or responsibilities expressly delegated to the Committee by the Board. Review of the company s remuneration policy NBL has a remuneration policy that applies to its Executives. This policy is geared specifically to supporting its business goals by enabling it to attract, acquire, retain and appropriately reward executives of the calibre necessary to deliver the required high levels of performance. The policy is reviewed periodically to take account of changing circumstances in the market, the industry and the economy. The main principles of the company s remuneration policy for Executives are to: provide total remuneration which is competitive in structure and quantum with comparative companies practices within the Southern African Development Community (SADC) Region achieve clear alignment between total remuneration on the one hand, and delivered business and personal performance on the other link variable elements of remuneration to the achievement of challenging performance criteria that are consistent with the best interest of the company provide an appropriate balance of fixed and variable remuneration, and provide internal equity among executives and facilitate the movement of executives within the O&L Group. Directors emoluments The Director s emoluments are disclosed in Annexure D of the Annual Financial Statements. Remuneration components Base salary The fixed element of remuneration is referred to as base salary. Its purpose is to provide a competitive level of remuneration for each grade of manager. The base salary is subject to annual review. It is set to be competitive at the median level, with reference to market practice in companies that are comparable in terms of size, market sector, business complexity and international scope. Base salaries are reviewed annually and adjusted as necessary at the beginning of the financial year, taking into account external market trends, and business and personal performance. Benefits Benefits provide security for employees and their families and include membership of a retirement fund and a medical aid scheme to which contributions are made. The retirement fund is a defined contribution fund. Short-term incentive Executive Directors and the rest of the senior leadership team participate in an annual short-term incentive (STI) scheme. The STI is a cash bonus plan designed to support the overall remuneration policy by focusing participants on achieving financial year performance goals which contribute to sustainable shareholder value, and providing significant bonus differential based on performance against predetermined company financial targets, as well as strategic and divisional or personal performance objectives. Executive Directors and senior leadership members may earn a bonus of up to 41.67% of their total annual package. The senior leadership team s functional targets are based on their respective critical success factors, and include both financial and non-financial targets. Financial targets comprise 50% of the STI bonus potential, while strategic and divisional/personal targets, including leadership competency assessments, make up the remaining 50%. The Remuneration Committee reviews the performance of Executive Directors and the senior leadership team every year. The Committee also approves individual performance against relevant targets and objectives once a year. Long-term incentive NBL did not have a long-term incentive plan in place for the year under review. The Board of Directors resolved to defer the implementation of such a plan until further notice. 45

24 Corporate Governance... Corporate Governance CORPORATE GOVERNANCE The NBL Board is committed to the highest standards of corporate governance. This report outlines the way the Directors control and govern the company. THE BOARD OF DIRECTORS Compliance NBL is subject to all applicable Namibian legislation as well as the listing requirements of the Namibian Stock Exchange (NSX). The NSX requires NBL to comply with the King II recommendations. NBL is already committed to follow the latest principles of the King III recommendations, as relevant in Namibia. The Remuneration Committee absorbs the function of the recommended Nominations committee. The Remuneration and Nominations committee has the duty to ensure that succession planning is implemented and monitored regularly. The Committee also has to verify that Directors are appointed based on the experience, knowledge and skills they bring and which will benefit NBL. King III recommends that the majority of directors be independent. In this regard, the NBL Board continues to depart from King III recommendations in respect of the number of independent Directors serving on NBL s statutory committees. NBL Directors continue to be appointed based on their experience, competency, leadership stills and strong business ethics, and it is these attributes that are regarded as the main criteria for appointment. The Board currently consists of 2 Executive Directors and 13 Nonexecutive Directors. There were no resignations or appointments during the year under review. Resignations and appointments subsequent to reporting date are disclosed in the report of the Directors. The NBL Board of Directors governance philosophy entails separating the Chairman s and Managing Director s responsibilities separate, as recommended by King III. New Directors are guided through a tailored induction programme that offers them a thorough understanding of the NBL s operations, listing requirements, codes of conduct and other applicable codes, as well as a brief on their duties. The Board believes that it holds an appropriate balance of skills, collective experience, knowledge and skills to be dynamic and effective. Committees The Board of Directors discharges its responsibility through Board meetings, a Remuneration and Nominations Committee, an Audit Committee, and a Risk Committee. Each such Committee has a charter which governs its authority. The Audit and Risk Committees meet at least three times a year, the Remuneration and Nominations Committee meets whenever necessary, and the Board meets quarterly. Board During the year, three Board meetings were held. Attendance was as follows: Board members 4 SEPTEMBER 27 NOVEMBER 26 MARCH S Thieme (Chairman) N Blazquez E Ender Hb Gerdes P Grüttemeyer S Heimstra B Kidner M Kromat Dfm Leleu Cl List G Mahinda B Masche Lv Mcleod Katjirua L Van Den Borght H Van Der Westhuizen apology present The Board has the responsibility of reviewing and evaluating the company s strategic goals, agreeing on performance indicators, and identifying key risks. The senior leadership team is charged with implementing the company s strategies and objectives. The senior leadership team is also responsible for ensuring that internal controls are in place and functioning in order for the company to operate and to mitigate risk. The Board of Directors holds Management accountable for their activities, which are monitored and controlled through regular reports and performance measurements. Procedures are in place to ensure all Directors are obliged to declare any potential conflict of interest before any Board or any other Committee meeting. Directors are required to avoid any direct or indirect interest that conflicts or may conflict with the company s interest. Mr Sven Thieme was re-elected as the Chairman of the Board at the Annual General Meeting. Mr Hendrik van der Westhuizen and Mr Bruce Kidner were the two Executive Directors serving on the Board of Directors up to 30 June. At the Annual General Meeting (AGM) held on 5 December, four Directors retired from the Board, but made themselves available to be re-elected for the next term. All Directors were re-elected by majority vote. Audit Committee The Audit Committee oversees the internal control and policy function. The Committee is chaired by Mr HB Gerdes, a Nonexecutive Director. Mr P Grüttemeyer (O&L s Chief Executive Officer), Mr M Kromat (Brandhouse) and Mr DFM Leleu (Heineken) are also Non-executive Directors who serve on the Audit Committee. The External and Internal auditors, the Finance Director, and the Managing Director attend Audit Committee meetings by invitation. The Committee invites other members of Management as required. Audit Committee meeting attendance is detailed in the table below: members 2 AUGUST 5 NOVEM- BER 6 MARCH Hb Gerdes (Chairman) P Grüttemeyer M Kromat Dfm Leleu # # # present # appointed at the Board meeting held on 26 March The Audit Committee is responsible for reviewing financial information and shareholder reporting, including: monitoring the integrity of financial statements and making recommendations to the Board ensuring integrated reporting takes place reviewing and approving the external audit plan and proposed fees reviewing and monitoring the internal audit plan monitoring the effectiveness of the risk management process, including fraud and corruption, information-technology-related items, and compliance with risk standards adopted by the Group monitoring the effectiveness of the Group s system of internal controls reviewing the Group s policies and practices concerning business conduct and ethics, including whistle-blowing reports received via the Tip-offs Anonymous hotine, and reviewing internal and external audit reports and monitoring that corrective actions are performed. 47

25 Corporate Governance... Corporate Governance Risk Committee The Risk Committee reports to the Audit Committee. The Risk Committee consists of Executive Directors Mr H Van der Westhuizen and Mr B Kidner, as well as key senior leaders from NBL. The O&L Group Risk Manager also serves on this Committee. The Committee regularly evaluates the company s exposure and responses to significant business, operational, strategic and financial risks. The Directors are ultimately responsible for the company s risk management system. The system is designed to manage risk rather than to eliminate it. On a monthly basis, risks are identified, assessed and discussed within the different business functions. These risks are closely managed, monitored and mitigated. The top key risks are reported with their respective mitigation plans at each Board meeting as well as at Audit Committee meetings. Two Risk Committee meetings were held during the year under review. The minutes of this Committee are made available to and discussed at Audit Committee meetings as well. Internal controls NBL has a robust controls review process in place. Testing whether the business complies with internal control procedures and policies is achieved by continuous management reviews, a review of internal financial controls, and a review of external parties providing internal audits. Experienced and qualified employees are appointed as control champions throughout the business functions in order to review and evaluate financial as well as technical controls. Any deficiencies are recorded, monitored regularly, and reported to the senior leadership team. This has proven to be a very successful approach to critically evaluate and improve internal control policies and procedures. The internal audit function was outsourced to the auditing firm Ernst & Young. The internal audit programme is founded on a threeyear risk-based approach. The internal audit plan is reviewed on a regular basis by the NBL Compliance function. Significant findings were reported and resolved. All findings and recommendations are recorded on a tracker and closely monitored by Management. The Compliance function is responsible for ensuring that corrective actions are taken and recommendations implemented. Ernst & Young also performs follow-up audits and reports independently to the Audit Committee and to Management as regards their own findings and the recommendations based thereon. Both the internal and external auditors have unlimited access to the Chairperson of the Audit Committee. There is a strong drive within NBL to uphold the highest technical and operational standards. Fire and safety policies and procedures are reviewed and tested on a regular basis so that they continue to be compliant with the highest standards. On a regular basis, there are also internal health and safety audits, which are performed by Managers within the different functions. Each Manager within his/ her function is evaluated constantly on the health and safety ratings achieved during these audits. By strictly following this programme, NBL has managed to improve its health and safety standards not only for staff, but also with respect to contractors, suppliers and other providers of services to NBL. For the last three years, an annual insurance audit has been performed by Alexander Forbes Insurers. The main plant is audited on an annual basis, while depots are audited on a rotational basis. This year, the Keetmanshoop and Ruhr Street depots were audited. NBL is proud to have maintained its five-star rating being the highest possible rating that can be awarded. Stakeholder communications, ethics and the Tip-offs Anonymous hotline NBL engages with its stakeholders on a regular basis, and its interim and final results are announced at analyst presentations. These results are also available on the NBL website and are published in local newspapers. If an employee is not comfortable with airing his or her views at these forums, they can contact the Tip-offs Anonymous hotline. The hotline is administrated by an independent service provider, namely Deloitte. This is supported by communication of our core value We do the right things right. All Directors may seek independent advice at the company s expense under appropriate circumstances in the discharge of their responsibilities. The Company Secretary is responsible for verifying that all Committees comply with statutory, regulatory and NSX listing requirements. The Compliance function is responsible for submitting compliance certificates to the NSX each year. Directors have access to the Company Secretary at all times. 49 During the reporting year, the following internal audits were performed: Information technology general controls Fixed asset accounting and management Warehouse and distribution management Fraud risk assessment, and Continuous control monitoring. The Audit Committee is responsible for embedding a culture of high ethical standards. Employees have several means available to them to raise their concerns and make recommendations or obtain feedback from the senior leadership teams. NBL holds a workplace forum within the different functions on a weekly or bi-weekly basis. At these forums, our staff have the opportunity to discuss matters of concern to them. Brewhouse

26 Group Salient Features.. Group Value Added Statement... GROUP SALIENT FEATURES GROUP VALUE ADDED STATEMENT 30 June N$ 000 s 30 June N$ 000 s % Change Notes 30 June N$ 000 s 30 June N$ 000 s Revenue Profit attributable to ordinary shareholders (67.1) WEALTH CREATED Revenue Paid to suppliers for materials and services ( ) ( ) Earnings per share (cents) (67.1) VALUE ADDED Income from investments Headline earnings per ordinary share (cents) (Restated) Dividends declared per ordinary share (cents) Net asset value per ordinary share (cents) (5.2) Return on ordinary shareholders' funds (%) (68.2) TOTAL WEALTH CREATED WEALTH DISTRIBUTION Salaries, wages and other employment costs Providers of capital Dividends to shareholders Finance costs on borrowings Central and local governments Reinvested in Group to maintain and develop operations Amortisation Depreciation Retained earnings (46 842) Deferred taxation TOTAL WEALTH DISTRIBUTED NOTES TO THE VALUE ADDED STATEMENT 1. Salaries, wages and other employment costs Salaries, wages, overtime payments, commissions, bonuses and allowances Total contributions to medical aid and pension fund Central and local governments Normal corporate taxation Rates and taxes paid on properties Additional amounts collected on behalf of central and local governments Customs and excise duties including import surcharges Value added tax collected on revenue PAYE deducted from remuneration paid Witholding taxes Number of employees

27 Five-Year Summary of Results.. Summary of Statistics... FIVE-YEAR SUMMARY OF RESULTS SUMMARY OF STATISTICS N$ 000 s 30 June 30 June 30 June June June June 30 June 30 June June June 2009 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Property, plant and equipment Investment in joint venture Other non-current assets Current assets Total Assets ORDINARY SHARE PERFORMANCE Weighted average number of shares in issue (000's) Earnings per ordinary share (cents) Headline earnings per ordinary share (cents) (Restated) Dividends paid per ordinary share (cents) Dividend cover (times) Net asset value per ordinary share (cents) Issued capital Retained income Ordinary shareholders' equity Interest-bearing loans and borrowings (non-current) Other non-current liabilities Current liabilities Total equity and liabilities CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Turnover Operating expenses ( ) ( ) ( ) ( ) ( ) Operating profit Finance costs ( ) (23 233) (14 281) (12 075) (3 425) Finance income Equity loss from joint venture (on-going operations) ( ) (92 147) (74 867) (78 372) (35 630) Equity loss from joint venture (deferred tax asset write down) ( ) Profit before income tax Income tax expense ( ) ( ) (96 034) (71 061) (70 918) Profit attributable to ordinary shareholders CONSOLIDATED STATEMENTS OF CASH FLOWS Cash generated by operations Dividends paid ( ) ( ) (97 117) (91 046) (80 931) Taxation paid ( ) ( ) (81 061) (73 704) (51 917) Net cash flow from operating activities Net cash flow applied to investing activities ( ) ( ) ( ) ( ) ( ) Net cash flow from financing activities (17 989) (19 279) PROFITABILITY AND ASSET MANAGEMENT Operating margin (%) Return on total assets (%) Return on ordinary shareholders' funds (%) LIQUIDITY AND LEVERAGE Total liabilities to total shareholders' funds (%) Financial gearing ratio (%) Interest cover Current ratio Note: During the prior year the equity accounted loss of the joint venture (N$ ) was inadvertently omitted from the Headline earnings per share calculation. This resulted in Headline earnings per share being disclosed as cents instead of cents as shown above. Headline earnings for previous periods as shown above have been adjusted accordingly. The error does not have any other impact on the financial statements. DEFINITIONS Dividend cover: Profit attributable to ordinary shareholders divided by dividends paid in the year. Net asset value per share: Ordinary shareholders' equity divided by the total number of ordinary shares in issue. Operating margin: Operating profit expressed as a percentage of revenue. Total assets: Property, plant and equipment, current and non-current assets. Return on total assets: Operating profit plus finance income expressed as a percentage of average total assets (excluding investment in joint venture). Return on ordinary shareholders' funds: Profit attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders' equity. Total liabilities: Interest-bearing loans and borrowings other current and non-current liabilities. Deferred taxation and income is excluded. Financial gearing ratio (%): Interest-bearing loans and borrowings expressed as a percentage of ordinary shareholders' equity. Interest cover: Operating profit plus finance income divided by finance costs. Current ratio: Current assets divided by current liabilities. 53 Net (decrease) / increase in cash and cash equivalents (85 372) (86 290)

28 Ordinary Share of Ownership.. ORDINARY SHARE OF OWNERSHIP Number of Shareholders % Number of Shares % 54 HOLDINGS shares and above CATEGORY Corporate bodies Nominee companies Private individuals Trusts SHAREHOLDER SPREAD The spread of shares held by non-public and public shareholders was as follows: at 30 June % at 30 June % Non - public shareholders - holding company directors and their associates and trustees of the Company's share purchase trust Public shareholders MAJOR INDIVIDUAL HOLDINGS With the exception of nominee holdings, the holding company and Diageo Heineken BV, the register of members does not reflect individual beneficial shareholdings at 30 June in excess of 1% of the total issued capital of the Company. 55

29 Financial Review... Approval of Financial Statements... APPROVAL OF FINANCIAL FINANCIAL REVIEW STATEMENTS 56 ACCOUNTING POLICIES Revenue Consolidated revenue increased by 10% to N$2,383.4 million from N$2,160.1 million. The increase in revenue is primarily driven by performance in our home market and increased volumes produced and supplied to DHN our South African Joint Venture. Operating profit The Group s operating profit showed an increase of 17% over the previous year. This translates into an operating margin of 21.0% compared to 20.0% in the previous year. The Group s cost base has benefited from continuous focus on our costs and our brewery investments. Taxation The taxation charge was N$126.8 million compared to N$114.0 million for the previous year. In the current year taxable profits from exports were a smaller percentage of total taxable income than in the prior year. The group benefits from allowances on profits derived from exports. Accumulated tax losses of the Group s wholly owned South African subsidiary have not been recognised, due to uncertainty regarding the utilisation of the losses. Profit after tax and earnings per share Profit Attributable to Shareholders decreased by 67% over the corresponding period, based on an effective tax rate of 63.5%. The earnings per share is 35.3 cents (: cents). Financial position The net debt to equity ratio remains healthy at 1% and is still within prescribed borrowing capacity of the Group (see note 31). Namibian Market Overall beer sales volumes in Namibia continued to grow at double digits delivering a 12% growth compared to the previous year. The Tafel brand continued to outperform the portfolio and was the main driver of the overall beer growth. Windhoek Draught continues to perform well and has also contributed to the overall growth in volumes. Our ready to drink range (RTD) sales have seen a slight decline whereas Vigo, the new-to-world malt soft drink range launched in has had a solid start and continues to outperform expectations. South Africa The operating loss attributable to DHN Drinks (Pty) Ltd increased compared to the prior year, however taking into account royalties and production margins that NBL receives for contract packing for South Africa, NBL continued to make positive returns from the ongoing operations of our South African business. Total volumes produced by NBL and sold to DHN Drinks (Pty) Ltd were up by 1% compared to the prior year. Our South African joint venture continued to grow sales at single digit levels despite the highly competitive environment. Exports (excluding South Africa) Export markets performance continued to deliver mixed performance, with increased competition particularly in the SADC countries we trade in. The business will focus on fewer key markets going forward. Significant Matters The Group has invested into DHN Drinks (Pty) Ltd during the year an amount of N$293.3 million (: N$94.6 million). In addition, the group further recognised a full write-down of the deferred tax asset in DHN Drinks (Pty) Ltd given that negotiations to amalgamate DHN Drinks (Pty) Ltd and the Sedibeng Brewery operations had not concluded by 30 June. The Group has also continued to invest in plant and equipment in line with its expansion and replacement plans. Cash flows Net cash flow from operating activities increased from N$147.3 million in the prior year to N$481.3 million in the current year. The increase was driven by an increase in volumes and greater efficiences achieved within working capital. Net cash flow from investing activities increased from a net outflow of N$204.5 million in the previous year to N$287.4 million in the current year, due to additional investment in DHN (Drinks) Pty Ltd. Net cash out flow from financing activities was due to the decrease in medium term loan facility (see Annexure A). Directors responsibility statement The Company s directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements, comprising the statements of financial position at 30 June, and the statements of comprehensive income, the statements of changes in equity and cash flow statements then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and in terms of the Namibian Companies Act. The directors responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these financial statements so that they are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The directors responsibility also includes maintaining adequate accounting records and an effective system of risk management. The directors have made an assessment of the Group and Company s ability to continue as a going concern and there is no reason to believe the businesses will not be operating as going concerns in the year ahead. The auditor is responsible for reporting on whether the group annual financial statements and separate parent annual financial statements are fairly presented in accordance with International Financial Reporting Standards and the Companies Act. Approval of consolidated and separate financial statements The consolidated and separate financial statements of the Company, as indicated above, were approved by the board of directors on 17 September and signed on their behalf by: S Thieme Chairman Hendrik van der Westhuizen Managing Director 57