Tuesday, September 26, 2023

Alcohol levy refund propels Sechaba profits


Sechaba Brewery Holdings Limited, through its two associates Kgalagadi Breweries Limited (KBL) and Coca Cola Beverages Botswana, has reported stellar full-year earnings on the back of the alcohol levy refund and increased sales volume.

Sechaba’s profit for the year ending December 2018 is reported at P220 million, up 97.1 percent from the previous corresponding period following an increase in consumption of products, up 5.2 percent in volumes, with clear beer volumes spurring the growth as it benefitted from trade execution.

However, in a turn of fortunes, the alcohol levy – which usually dampened profits ÔÇô this time contributed to the significant jump in profit, as a result of once-off refund of the alcohol levy that was charged on exercise for the years 2017 and 2018. Without the refund, Sechaba’s profit would have only been up by 39 percent.

The brewer’s impressive financial performance was stoked by President Mokgweetsi Masisi’s decision to extend the operating hours of liquor outlets, allowing the company to increase sales volume. The company as it now seems, also benefitted from a huge cut in the alcohol levy, after the government slashed the levy which was introduced in 2008 ÔÇô from 55 percent to 35 percent for local and imported alcoholic products.

Previously, Sechaba’s results were directly linked to its sole associate, KBL, but this has now changed, with an addition of another associate, Coca Cola Beverages Botswana, which was formed after major restructuring at Sechaba and KBL. Prior to the changes, Sechaba’s stake in KBL was 60 percent, while Ab InBev Africa held 40 percent.

This was due AB InBev and The Coca-Cola Company (TCCC) reaching an agreement in principle for TCCC (or its affiliate) to acquire the non-alcoholic ready-to-drink business segment of KBL. On 3 July 2018, the companies entered into a Master Purchase Agreement in terms of which the sellers agreed to dispose of their interest in KBL’s business of non-alcoholic ready-to-drink beverages to Beverage manufacturers.

Sechaba together with AB InBev Africa as shareholders of KBL had a similar indirect shareholding structure in Beverage manufacturers, which was KBL’s dormant subsidiary. The ownership structure of Beverage Manufactures was reorganised from indirect to direct ownership, with KBL transferring 60 percent shareholding to Sechaba and 40 percent to AB InBev Botswana.

AB InBev Africa then formalised its voting control of KBL and Beverage Manufacturers, by trading its entire shareholding in Sechaba in return for part of Sechaba’s holdings in KBL and Beverage Manufacturers. The transfer involved repurchase by Sechaba of AB InBev’s entire 16.839 percent in Sechaba, which represented the 10.1 percent interest in each of KBL and Beverage Manufacturers.

As a result of the share repurchase, Sechaba’s financial results in KBL and Beverage Manufacturers reduced from 60 percent to 49.9 percent while AB InBev Africa held 10.1 percent of each of KBL and Beverage Manufacturers, and AB InBev Botswana continued holding 40 percent of each KBL and Beverage Manufacturers. After the restructure, AB InBev Africa ceased holding shares in Sechaba.

Still, AB InBev Botswana then sold its 40 percent stake in Beverage Manufacturers to TCCC, while AB InBev Africa sold its 10.1 percent in Beverage manufacturers to TCCC. In addition, AB InBev Botswana also sold its 40 percent shareholding in KBL to AB InBev Africa. After the maze of transactions was complete, AB InBev Africa held 50.1 percent of the issued shares, with Sechaba holding 49.9 in KBL. TCCC now holds 50.1 percent in Beverage manufacturers, and Sechaba stake is 49.9 percent.

Sechaba has now announced that the recently revived Beverage Manufacturers is now known as Coca Cola Beverages Botswana.


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