Friday, February 26, 2021

Gov’t tenders, not retail, boost Sefalana profits

Sefalana seems to be having a tough time against its competitors in the saturated local retail sector. The group’s financial results indicate that its revenue is largely hinged on its contract/tender business than it is on its core segment of fast moving consumer goods (FMCG).

Sefalana’s annual report released last week indicates that its Botswana operations in the FMCG sector experienced a dip in profitability as a result of lacklustre performance. 

“The Botswana FMCG market has been fairly flat during the year with an overall 4% decline in profitability,” says the report. It however adds that the lustreless profitability was bolstered by the Namibian FMCG sector which reflected a robust performance compared to that of Botswana contributing P0.8 billion to revenue. The Group’s financial results for the year ended 30 April 2015 highlighted that Sefalana will take advantage of its recently acquired UHT milk plant to secure a tender. 

“We are hopeful of being awarded the school children’s milk feeding scheme that our plant is specifically equipped to manufacture for,” reads the financial results report. The annual report reiterates this prospect by mentioning that the food manufacturing business continued to deliver consistently on the government feeding scheme throughout the year.  The manufacturing sector entails milling, production and sale of sorghum, soya and maize based extruded food products. 

The retail industry according to the financial analysis will likely experience a slowdown due to intense competition outside Botswana. While key retail players like Sefalana have had a good run with their successful expansionary operations outside the country, such growth is anticipated to deflate given the stiff competition that local retailers will face from long standing retail giants established within Africa. On the positive side, the analysis observed an increase of branded goods which is expected to reduce the sales costs and therefore add to gross profit margins.  The annual report cites that Sefalana’s upward profitability trend over the last three years, owed largely to increased focus on core segments of the Group. “From P109 million declared in April 2012, we have increased on average 25% a year to P191 million in 2015,” it states. The Group boasts of 21 Sefalana Shopper retail supermarkets, 25 Sefalana Cash and Carry outlets and three Sefalana Hyper stores.

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