At a presentation of Sechaba Brewery Holdings (Ltd) interim results for the past 6 months, KBL Managing Director, Hloni Matsela, tried to assure the media that the ‘business remains viable’.
“(However), the viability could be compromised,” he said.
Sechaba’s story of poor results goes beyond the usual crying from companies over the impact of the global economic recession and the ‘notorious’ 30% alcohol levy.
In a free market economy, companies can generate money according to their uncurtailed efforts.
Naturally, free market companies are supposed to make money the way they may. However, some companies do not honour acceptable standards.
The belief in the current administration is that the KBL product is to blame for the many social ills and road carnages. This perception was re-enforced Tuesday at a function aimed at unveiling the national logo against abuse of alcohol.
Government and international agencies demonized alcoholÔÇöa substance that has been regarded as a social drinkÔÇö saying is responsible for at least 60”known”social and health ills.
At least that is what the present government of Botswana thinks. In this matrix, the brewer finds itself in a precarious situation to make returns on investment for shareholders while simultaneously promoting safer drinking.
Operating profit for the group fell by 29% from P162.9 million in the same period last year to P116 million in the reporting period.
The KBL lager volumes were -34.8% in the red in 2009, compared to 16.9% in the same period last year while traditional beer volumes also felt the knocks, registering a -13.7% growth in the current reporting period compared to 15.5% in 2008.
The overall KBL volumes dropped by 28% with KBL’s operating profits declining by 36% while after tax profits declining by 39%.
BBL operating profit grew at 12% while its after tax profit fell by 10%. The traditional beer, which normally is a heaven for downgrading elbow benders, saw its sales dropping by 14% on prior year.
There is a tendency for consumers to cross over to the traditional beer when times are tough.
However, this decline is less compared to the drop on clear beer category.
Matsela, however, said that KBL exported a sizeable amount of its products to the DRC and Zambian markets.
These exports were not affected by the 30% alcohol levy. However, the exports are dependent on the local market needs of those countries and as long as there is shortage.
Despite the dampened mood in the market, Matsela said they will still be involved in Corporate Social Responsibility (CSR) programmes while hoping that the economic recovery will be faster.
“We are still involved in sports and we will still be involved if we are not still in business,” he said with a smile.
The 2009/2010 Kickstart programme has continued after its five year pilot programme with entrepreneurial opportunities continuing through operational initiatives like the Owner Driver, Runners and Returnable Bottles system.
Matsela said the expectations were that conditions for alcoholic beverages will remain tough during the second period, but was hopeful that the analysts were right when they noted that the downturn would soon be over.