• National Breweries expects earnings per to rise by 163%, supported by its commercial turnaround strategy, improved margins and unrealised exchange gains
• The key qualification is earnings quality, as the trading statement confirms operating losses narrowed, without yet confirming operating profitability
• Kwacha appreciation reduced imported input costs and generated accounting gains, while the full results due on 8 June 2026 will determine whether the recovery is cash-backed, volume-led and operationally sustainable

Harare- National Breweries Plc, the Lusaka Securities Exchange-listed beverages manufacturer, expects earnings per share for the year ended 31 March 2026 to increase by 163% compared to the corresponding prior period according to the latest circular.

The company confirmed that the company's commercial turnaround strategy has begun to gain traction, that operating losses narrowed as margins improved, and that overall profitability was further supported by unrealised exchange gains.

The full results are expected on 8 June 2026. Company Secretary Simbarashe Banga issued the trading statement by order of the board.

163% EPS growth is a number that would headline any results announcement in any market. Before accepting it at face value, three analytical qualifications embedded in the same statement deserve careful attention. First, operating losses narrowed, not operating losses turned to profit. The improvement is real and directionally correct, but the destination has not yet been reached.

Second, overall profitability was further supported by unrealised exchange gains. Unrealised exchange gains are non-cash accounting entries arising from the translation of foreign currency balances at a more favourable exchange rate than the rate at which those balances were originally recorded. They are not revenue from selling beer, neither a margin improvement from operational efficiency. They are a Kwacha appreciation windfall that passes through the income statement and inflates the reported profit figure without representing any improvement in the underlying commercial activity.

Third, the 163% increase is measured against a prior year whose weakness the turnaround strategy was designed to address. A 163% increase on a very low base is a different achievement from a 163% increase on a healthy one, and the absolute EPS level that will be disclosed in the 8 June full results will determine which category this outcome belongs to.

Delta Corporation's South African and Zambian operations showed signs of recovery in FY2026 but continued to face operational headwinds, which is the same Zambian market in which Natbrew operates and whose conditions the Delta disclosure confirms are challenging at the same time that Natbrew is reporting its recovery.

The Zambian Kwacha appreciated 21% against the US dollar in H1 2026, earning the distinction of the world's best-performing currency in January 2026, driven by copper export strength, improved fiscal discipline under President Hichilema's economic reform programme, and capital inflows attracted by Zambia's debt restructuring progress.

 For National Breweries, that Kwacha appreciation operated through two distinct channels simultaneously. The first channel was cost-reducing: the landed cost of imported inputs, including raw materials, packaging components, and equipment, denominated in US dollars or South African rand, declined in Kwacha equivalent terms as the currency strengthened. Management's specific identification of the localisation of selected raw materials combined with Kwacha appreciation as the mechanism reducing landed input costs confirms that both factors worked in the same direction during the year. The second channel was the unrealised exchange gain that inflated reported profitability without representing operational improvement.

The third effect of Kwacha appreciation, which the trading statement does not discuss, is the competitiveness impact on Natbrew's export markets and on the landed cost of competing imported products in the domestic market. A stronger Kwacha makes Zambian manufactured goods more expensive in regional export markets, which for a beverages company with regional sales ambitions reduces the price competitiveness of its export volumes.

It also makes imported competing beverages cheaper in Kwacha terms, potentially increasing competitive pressure in the domestic market from imported brands whose Kwacha equivalent prices have fallen. The Kwacha's appreciation is therefore simultaneously the mechanism behind Natbrew's cost improvement and a competitive pressure source whose net effect on volumes and margins will only be fully visible in the full year results.

The company confirmed that extensive loadshedding at the start of the year materially disrupted production and adversely affected volumes and sales performance. Zambia's electricity crisis through 2024 and into early 2025 was among the most severe in the country's history, driven by record low water levels at the Kariba Dam that supplies a dominant share of Zambia's generation capacity. Load shedding of up to 24 hours per day was documented in Zambia's major urban centres during the worst months of the crisis, and the impact on manufacturing operations, including National Breweries' production facilities, was direct and measurable.

The operating environment improvement that the statement credits with enabling the business to mitigate the effects of weak consumer demand reflects Zambia's gradual electricity recovery through the year as water levels at Kariba partially recovered and emergency power imports from the SAPP regional grid were increased.

The improvement in loadshedding conditions through 2025 is the operating environment variable whose easing enabled Natbrew's production recovery, and it is also the variable whose continuation into 2026 is most directly connected to the 2026/27 El Niño probability that Zimbabwe's Meteorological Services Department has assessed at 88% to 94%. A return to severe drought conditions would reverse the Kariba recovery, reinstate the loadshedding that disrupted Natbrew's production in the prior year, and create the same production and sales disruption in FY2027 that the company is recovering from in FY2026.

Delta Corporation reported a 35% revenue increase to USD 1.09 billion for the year ended 31 March 2026, with operating income surging 42% to USD 209 million. Basic earnings per share grew 35% to 11.44 US cents. Sorghum beer volumes achieved historic 19% volume growth, surpassing a 1998 peak, while sparkling beverages recorded a 14% volume increase.

The comparison between Natbrew's 163% EPS growth and Delta's 35% EPS growth is not a comparison that favours Natbrew in analytical terms. Delta grew EPS 35% on a USD 1.09 billion revenue base with USD 209 million in operating income, paying USD 306 million in corporate taxes alone. Natbrew grew EPS 163% from a position of narrowing operating losses supported by exchange gains, on a revenue base that the full results will quantify but that the Lusaka Securities Exchange's market capitalisation for the company suggests is measured in tens of millions of Kwacha rather than hundreds of millions of US dollars.

The percentage growth headline favours Natbrew dramatically. The absolute commercial substance and operational profitability favours Delta by a comparable margin in the opposite direction.

Delta's sorghum beer volumes rose by 19% to 4.62 million hectolitres, surpassing a 1998 peak that many thought would never be reached again. Sorghum beer, which is Chibuku and its variants, is the category in which Delta and National Breweries most directly compete in their respective markets. Delta is producing 4.62 million hectolitres of sorghum beer in Zimbabwe at record volumes while National Breweries is recovering from a year of production disruption in Zambia. Both are operating in the same traditional beer category, in neighbouring southern African markets, in the same year. The performance divergence between them is not explained by category dynamics or commodity cycles. It is explained by the operating environment quality in each country and by the stage of operational maturity each company has reached.

Delta's 94% USD revenue denomination, its USD 209 million operating income, and its ability to pay USD 306 million in corporate taxes while still growing volumes across all segments describes a business operating at a level of commercial confidence and financial stability that Natbrew's turnaround, however genuinely promising the 163% EPS growth suggests it is, has not yet reached. Delta's performance sets the benchmark for the year. Revenue grew by 35% to USD 1.09 billion, with operating income up by 42% to USD 209 million. Lager beer volumes grew by 19% to 3.15 million hectolitres.

The destination for Natbrew is an operating profit that does not require unrealised exchange gains to produce a positive bottom line, a volume base that reflects genuine consumer demand recovery rather than relief from the prior year's loadshedding disruption, and a raw material cost structure whose localisation programme is deep enough to provide margin protection when the Kwacha's appreciation cycle eventually reverses. None of those conditions is confirmed by a 163% EPS increase supported partly by exchange gains on a base year of operational weakness.

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