Rwanda’s Bralirwa makes history

By Special correspondent

First national company to issue dividend

Directors of Rwanda’s leading brewery by market share, Bralirwa, a subsidiary of Heineken International, has proposed a 100 percent net income dividend payout as an incentive to investors. The proposal is the first of its kind in Rwanda and will be subject to shareholder approval at Bralirwa’s Annual General Meeting (AGM), scheduled for June 21, 2010.

Bralirwa intends to pay Rwf20.09 per share, compared to the Rwf12.34 shareholders paid for the shares in 2009. The move, analysts say, is equivalent to the dividend yield of 9.8 percent on the current share price. According to Lionel Mudandi, the operations officer at the Africa Alliance Rwanda investment bank, Bralirwa’s year on year earnings per share of 63 percent is due to the gearing effect, which reflects that the company is using less debt to finance its activities.

Celestin Rwabukumba, the Operations Manager of Capital Market Advisory Council (CMAC) says the move has changed the pessimistic perception about the stock exchange among local investors. “It does provide serious confidence in the market and it is likely to influence other companies that may want to list.”

During a recent press conference Bralirwa’s CEO, Sven-Erik Piederiet said: “If approved, a final dividend of Rwf7.3 billion ($12.4 million) corresponding to Rwf14.26 per share will be paid on July 21, 2011, as an interim dividend of Rwf3 billion ($5 billion) corresponding to Rwf5.83 per share paid on November 12, 2010.” The payment, the company added, will be subject to a withholding tax.

The former final dividend date, according to the directors, will be June 13, 2011, while the close date for Bralirwa shares will be June 21, 2011.

One of the central questions now being asked is whether the 100 percent dividends policy will allow Bralirwa to make the much needed capital investment to cater for the growing demand for its products as well as accommodate future growth.

Mudandi told The Independent that Bralirwa has enough resources at its disposal, approximately Rwf3.5 billion ($5.9 million), with no debt. However, Mudandi is pessimistic about the sustainability of the brewery’s 100 percent dividends policy in the long run. “When they decide to expand then they may…cut dividend—say to 30-50 percent of earnings or…take on debt. So this does not endanger their expansion or investment plans at all,” he said in an email interview.
However, Piederiet said that Bralirwa has abundant liquidity with strong free operating cash flow, which grew by Rwf9.5 billion ($16 million) last year, driven by a significant increase in profitability and working capital improvements. This, he said, will sustain the company’s dividends policy and also support the necessary capital expenditure. “The current cash flow allows us to pay dividends and invest even without taking credit,” he added. “Bralirwa will expand capacity towards the end of 2011 with 35 percent to cater for the market demand.”
From 2007-2010, Piederiet said, the company achieved a compounded average growth in net profits of 56 percent. Moreover, Bralirwa’s earnings before interest and tax grew by 49.2 percent, on account of a strong volume performance, higher pricing and effective cost management.

The brewery said in its annual report for the financial year ending December 31, 2010 that its net profit grew by 62.8 percent to Rwf10.3 billion (US$17.4 million), driven by lower interest expense and lower income tax expense. The company said its continued focus on employee excellence and brand strength also helped it to maintain a healthy financial position.

Also Bralirwa’s audited financial results reveal that its revenues grew by 16.1 percent to Rwf52.8 billion, up from Rwf45.5 billion, boosted mainly by increased sales of Primus and Mützig beer brands and higher soft drink sales. Bralirwa produces and sells soft drink brands under a licensing agreement with the Coca-Cola Company.
Chairman of the board, Jean Paul Van Hollebeke, said the company intends to invest further in its infrastructure network and human capital, with an aim to meet the growing market demand for its products.
“The training and development of our people remains a key priority and an important source of ongoing competitive advantage,” said Van Hollebeke. “We will not cease to strive for improvements in all areas of our business.”

Hollebeke added that while 2011 is expected to offer promising opportunities for businesses in Africa due to the positive political and economic climate, the Rwandan economy in particular continues to demonstrate strong resilience with ongoing economic development.

However, in the years ahead Bralirwa will also face stronger local and regional competition. Locally, Bralirwa faces competition from BMC, which launched its famous brand, Skol, last year, and its regional competitors, including East African Breweries, are increasing their presence on the Rwandan market following the launch of the EAC customs union, which allows tax free imports for products manufactured within the EAC.