No good news yet from Sechaba

12 Aug 2018

Botswana’s premium brewer, Sechaba is expecting nothing but a rock bottom profits for its half year business financials for the period ended 30th June 2018.

On Friday, the brewer announced to its shareholders that the profit after tax for the period ended 30 June 2018 will be lower than that of the comparative previous period.

Sechaba, the holding company which runs Kgalagadi Brewery Limited (KBL) has continuously decried the effects of the levy and traditional beer regulations in its operations, which have subsequently affected the company’s profit margins on yearly basis.

The regulatory environment started hitting on the company’s profits after the alcohol levy and traditional beer regulations introductions in 2008 by the Ministry of Trade.

The once popular local traditional brew Chibuku then started losing its dominance in the alcoholic beverages’ market since then.

The implementation of the traditional beer regulations resulted in thousands of drinking spots shutting down in residential areas across the country.

The consumption patterns also affected the buying power of the consumers at the backdrop of the alcohol levy introduction, which has also been seeing a hike in every corner over the years.

The Alcohol Levy Regulation was amended effective 1 April 2016. The levy rate for alcohol content of 5% and below was changed to 50% and for alcohol content above 5% remained at 55%.

The brewery was at some point forced to think outside the box in order to return Chibuku as the dominating brand in the alcoholic beverages’ market, as well as developing strategies to bring the company profitability to normalcy but it has not been easy for the company.

Competition on non alcoholic beverages also affected the Sechaba volumes, as competitors such as Sefalana, Choppies amongst others introduced their own in-house brands to the market.

Looking at the last year performance, the 2017 full year saw volume declining by 4.7% compared with the 12 months period ended 31 December 2016 with beer and soft drink down 3.5% and 7.0% respectively. The profit for the year 2017 came at P111.6million compared to P127.1 million in the prior year, coming down by -12.2 percent year-to-year basis.