Sechaba Holdings Limited on Friday blamed the decline in fortunes to mixed performance of its products at a time when the regulatory environment has pushed swiggers away from accessing the alcoholic beverages.
The listed investment company with holdings in Kgalagadi Breweries Limited (KBL) and a traditional beer unit saw both its operating profit and profit after tax declining on the previous year. However, volumes were better than the prior period.
The company said on its full year results for the year ended 31 March 2015 that operating profit or (EBITDA) declined by 3.6 percent to P201.7 million from P209.1 million on the prior year. Equally, profit after tax (PAT) went down by 2.9 percent to P186.1 million from P191.8 million in full year 2014.
The Botswana Stock Exchange (BSE) listed company blamed the decline in financial performance on a negative mix impact of brand, pack and category.
“KBL saw a growth in bulk packs, and a decline in cans both in the beer and soft drinks categories,” said a statement accompanying the results.
“This caused a reduction in the actual gross margin ratio of the associate together with the increase in fixed costs due to inflation and volume growth. Fixed Costs and Marketing Costs were within the approved budget for the year,” it added.
According to Sechaba, Clear Beer grew by 4.8 percent with the 750ml Returnable Glass Bottle Pack (RGB) continuing to drive growth.
It said Alcoholic Fruit Beverages (AFBs) showed significant growth, finishing 831 percent over the prior year due to the ongoing growth of the Core 660ml RGB and category expansion into Redd’s.
Sparkling Soft Drinks performed well above expectations finishing the year 12.0 percent ahead of prior year. The growth in the 2L PET was the biggest contributor to volume growth, albeit at lower margins to cans.
The Non-Alcoholic Beverages (NABs) category ended the year 15.6 percent ahead of the prior year mainly due to strong growth by Source Water and Mageu, combined with incremental volume emanating from the mid-year introduction of Mazoe.
On the other hand, traditional beer declined by 4.3 percent against prior year due to the continuing impact of the Traditional Beer Regulations and the discontinuance of exports to South Africa.
“The challenges faced by the associate as a result of the Traditional Beer Regulations have sustained over the year. The company continues to find the appropriate routes to market within the Regulations.”
Sechaba’s KBL operates under tough environment in which the alcohol tax has affected sales as elbow benders buy cheap imported fixes. The company said on 19 December 2014, the Levy on Alcoholic Beverages was increased by 5 percent, bringing the total levy to 55 percent.