Wednesday, September 23, 2020

Booze ban bottles brewer Sechaba profits

The local alcohol industry is still smarting from the alcohol ban hangover on account of sporadic sale restrictions visited upon it by the Covid-19 pandemic declared in March 2020. 

This has not only presented possible job losses, business closures but also affected the levy collections for government coffers. 

In a notice last week Thursday by the  Board chairperson, Bafana Molomo, the Botswana Stock Exchange listed local brewer Sechaba Holdings warned its shareholders:  “ The results for the six month period ended 30 June 2020, the profit before tax will be approximately 60 percent (P56.6million) lower than the P95.5million reported for the period ended 30 June 2019. The financial results for the period ended 30 June 2020 are expected to be released on or before 30 September 2020, wherein full details will be provided.”

For the brewer which had to shut-down its plant due to lockdowns for over a month with an extended alcohol ban it had to suspend its production,.

Moreover, the company’s remaining stock in its inventory, meant the outcome from the expected results will not be satisfactory as already shown by the anticipated profits margins above. Job losses cannot also not be ruled out. 

The advent of the global Covid-19 pandemic has adjusted the outlook for the domestic and international economies.

The Minister of Finance and Economic Development Dr. Thapelo Matsheka has  indicated that the economy is expected to contract by up to 13 percent in 2020. 

Efforts to reduce unemployment are also predicted to be negatively impacted. This will impact the business outlook of Sechaba’s associates. 

For its full year financial results for 2019 for the year ended 31st December 2019, Sechaba holdings’s share of associates profit after tax declined by 12 percent over the period due to a 6 percent drop in KBL’s profit after tax. This decline was primarily due to the strong performance realised by KBL in 2018 resulting from, in large part to, the levy refund received in that year. 

The brewer successfully completed the first full year 20019 of operations since the decision in 2018 to separate and sell the non-alcoholic beverages bottling operations of Kgalagadi Breweries Limited (KBL) in order that it remains with the alcoholic operations, and Coca-Cola Beverages Botswana Limited (CCBB) with the non-alcoholic beverages bottling operations. CCBB had a very successful 2019 with volume growing by 34.2 percent over an equivalent full year 2018.

Sechaba performance – Business Outlook and Covid-19 

In March 2020, government instituted a number of interventions aimed at minimising the potential adverse impacts of the Covid-19 pandemic in the country.

According to the Board chairman Molomo, both interventions will have an impact on the associates, although this impact is expected to be temporary and the businesses will survive. 

“However, it is advised that the situation is changing constantly and that it will be monitored closely. The Group’s associates continue to forecast growth in 2020 notwithstanding the challenges relating to Covid-19. The business environment has been generally positive, and the Group continues to enhance relationships with all stakeholders. The associates continue to manage the performance and business continuity risks,” he said.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.