Monday, June 1, 2020

Alcohol levy adjustment led to Sechaba’s turnaround

BY PORTIA NKANI

The Botswana Stock Exchange listed brewer, Sechaba Holdings’ business has since turned around in response to the alcohol levy adjustment in September 2018.

After the challenging regulatory environment in the past years, especially experienced by the Alcohol Industry, Sechaba Holdings’ has now delivered impressive financial performance in its financial year 2017/2018.

The Group’s profit significantly grew by 97 percent compared to the prior years. According to the company’s annual report, this was due to the once-off refund of the Alcohol Levy that was charged on excise for part of the years 2017 and 2018. On a normalized basis, profit after tax excluding the refund was approximately 39 percent above prior year.

The group’s Chairman, Thabo Matthews, said the year under review was also symbolic of an investment company that took a quantum leap towards unity in diversity thereby transforming itself into a force to reckon with. The year 2018 which the Chairman termed as ‘year of evolution’; set the tone for the group to be stronger, with more diversified beverage portfolios enjoying the best of both worlds.

Matthews said the Group has had a successful year which however was not without its challenges. “Our focus this year is to continue to drive the organic growth of our business while deleveraging towards our optimal capital structure. As we look forward, we are excited about the growth opportunities.”

The annual report indicated that total company managed to grow volume, increase revenue and gain market share. Total volume grew by 5 percent compared to prior corresponding period spurred by the increase in clear beer volumes, which grew overall by 13 percent, which benefitted from a very solid trade execution and introduction of the high end company.

As a result, the Board declared a final dividend of 88 thebe per share as at 31 December 2018. While there is still more work to be done, the Board is confident in the strategy and plans to grow the business by creating value and delivering sustainable top and bottom line growth in the coming year and beyond.

Meanwhile, the amendment of the alcohol levy seems to have not made much of a positive impact to the local brewer. The levy was reduced by 20 percent from 55 percent to 35 percent. Despite this move Chairman said that the calculation for levy on locally produced alcoholic beverages is still based on the total cost of production and excise duty payable in terms of Customs and Excise Duty Act, “which means KBL continues to pay a tax on top of another tax. This anomaly continues to have a sizable impact to the company financial performance.”

PERFORMANCE BY SEGMENTS

Clear Beer

The Clear Beer category grew by 13 percent reflecting various initiatives in trade and focus on trade execution. The group launched various brands in the premium space through its  high end company leading to market gains. St Louis lager posted growth of 30 percent as a brand with all packs posting double digit growth. Carling Black Label has positioned itself with strong growth driven by the 750ml bulk which grew strongly. The above was supported by significant growth in the high end category (Budweiser, Stella Artois and Corona) as well as Castle lite which recorded a modest growth versus prior year.

Alcoholic Fruit Beverages (AFB)

The Fruit Alcoholic beverages category grew by 4 percent versus prior year. The growth is still driven by brand Redds Vodka Lemon with 500ml pack growing strongly supported by the 660ml pack.

Non Alcoholic Beverages

The category grew by 4 percent reflecting good growth in the sparkling soft drinks.

Traditional African Beer

The Chibuku brand posted modest results, which were almost level with the prior year. Within the category there was growth on both the beer powder and the 2L HDPE plastic pack, which was offset by the biggest contributor and most recognized Chibuku 1 Litre which posted a decline during the year under review. New initiatives are said to be in place to improve route to market and are expected to gain traction in 2019.

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