NATIONAL BREWERIES: THESE NUMBERS SHOULD SOUND AN ALARM

NATIONAL BREWERIES: THESE NUMBERS SHOULD SOUND AN ALARM By George N. Mtonga, MBA I have spent enough time looking at company balance sheets to know that there are numbers that deserve explanation, and then there are...

NATIONAL BREWERIES: THESE NUMBERS SHOULD SOUND AN ALARM

By George N. Mtonga, MBA

I have spent enough time looking at company balance sheets to know that there are numbers that deserve explanation, and then there are numbers that should immediately sound an alarm.

The latest audited financial statements of National Breweries Plc, published on the Lusaka Securities Exchange on 8 June 2026 for the year ended 31 March 2026, fall into the second category. LuSE’s current financial-statements archive shows these as the company’s latest published full-year financial results.

The numbers are extraordinary.

National Breweries reported total assets of only K452.991 million. Against those assets, the company had K1.707840 billion in current liabilities and no reported non-current liabilities.

That leaves National Breweries with negative equity of K1.254849 billion.

Put differently:

Assets: K453 million.
Liabilities: K1.708 billion.
Deficit: K1.255 billion.

That means National Breweries has approximately K3.77 of liabilities for every K1 of assets.

This is not a marginal imbalance. This is not a small technical deficit. This is a K1.25 billion hole in the balance sheet.

And Zambia’s law is very clear on what this means.

The Corporate Insolvency Act No. 9 of 2017 defines an insolvent company to include one whose liabilities exceed the value of its assets. The High Court has also expressly applied that statutory definition in considering whether a company whose liabilities exceeded its assets was insolvent.

On the numbers National Breweries itself has published, its liabilities substantially exceed its assets.

That should concern shareholders, creditors, regulators and the capital market.

The liquidity picture is equally troubling

The company reported just K305.984 million in current assets against K1.707840 billion in current liabilities.

That produces a current ratio of approximately 0.18:1.

In simple English, for every K1 of current liabilities, National Breweries had only about 18 ngwee of current assets on its balance sheet at 31 March 2026.

One particularly important number requires explanation: K1.423 billion was owed to related parties.

That related-party balance represents more than four-fifths of the company’s reported liabilities.

Now, related-party financing may be more patient than ordinary commercial debt. A parent company or shareholder may decide not to demand immediate repayment, refinance the obligation or ultimately recapitalise the business.

But that does not make the balance-sheet deficit disappear.

What investors deserve to understand is the plan.

Is this K1.423 billion going to remain as debt?

Will some of it be converted into equity?

Is the shareholder committed to recapitalising National Breweries?

What are the repayment terms?

What happens if that support is withdrawn?

These are not academic questions when a listed company has negative equity exceeding K1.25 billion.

Do not be distracted by the K277 million profit

Somebody reading only the headline earnings number might say:

“But National Breweries made a profit.”

Yes. The company reported profit before tax of K277.3 million for FY2026.

But look underneath that number.

National Breweries still recorded an operating loss of K167.1 million.

The major swing came from a massive K576.7 million net foreign-exchange gain, compared with a K135.2 million exchange loss in the previous year. The company itself says the stronger kwacha generated the exchange gains that offset the operating loss.

That distinction matters.

Foreign-exchange movements can dramatically improve reported earnings, but a sustainable company ultimately has to demonstrate that its core operations can consistently generate profits and cash.

The operating business still lost money.

Revenue was also 16% below the previous year, although management reported improving margins and a 33% increase in gross profit.

There are therefore signs of operational improvement, and those should be acknowledged. The company also generated K13.4 million of net cash from operating activities during the year.

But none of those improvements erase a K1.255 billion negative equity position.

I am not calling for National Breweries to be liquidated

That distinction is important.

Insolvency and liquidation are not the same thing.

A company may have an insolvent balance sheet while shareholders, creditors and management continue supporting its operations and pursuing a restructuring or recapitalisation.

So my argument is not that National Breweries should shut its doors tomorrow.

My argument is that a listed company carrying liabilities nearly four times the value of its assets deserves far greater public scrutiny and a clearly articulated recovery plan.

The company is employing people. It buys agricultural commodities. Its maize and sorghum contracting programmes reportedly support more than 1,300 farmers. It participates in Zambia’s manufacturing sector and has an important commercial footprint.

That is precisely why this matters.

We should not wait until businesses collapse before asking difficult questions.

The Board must tell the market how this balance sheet will be repaired

I would like to see National Breweries clearly address four things:

1. A credible recapitalisation plan explaining how the K1.25 billion negative equity position will ultimately be eliminated.
2. Clarity on the K1.423 billion related-party liability, including the long-term intentions of the related party providing that financing.
3. A pathway back to sustainable operating profitability, independent of extraordinary currency gains.
4. A realistic timetable for restoring positive shareholder equity.

LuSE and the Securities and Exchange Commission should also pay close attention to companies with deeply negative net asset positions; not because regulators should run businesses, but because capital markets function on disclosure, transparency and investor confidence.

A stock-exchange listing should mean something.

This is the alarm

In 2025, National Breweries already had negative equity of K1.532 billion. By March 2026 that deficit had improved to negative K1.255 billion. That is progress, but it remains an enormous deficit.

The company therefore has a mountain to climb.

As investors and as a country trying to deepen our capital markets, we should develop a culture of actually reading financial statements rather than simply celebrating revenue, profits or share prices.

When a listed company reports:

K453 million in assets,
K1.708 billion in liabilities, and
negative equity of K1.255 billion,

we should not whisper about it.

We should sound the alarm.

The numbers are public.
The numbers are audited.
And the numbers deserve answers.