Tuesday, October 27, 2020

Sechaba’s profit drops by 60%

They usually brag that their habit drives the economy, and it appears the elbow benders were right all along, with information from the country’s biggest brewer showing how the alcohol prohibition had more impact on their bottom-line than the non-alcoholic division which operated through out the period.

Sechaba Holdings is made up of two associate companies, Kgalagadi Breweries Limited (KBL) and Coca Cola Beverages Botswana (CCBB), holding 49.9 percent shareholding in each company, while the rest is held by Ab-InBev. In the financial performance for the half year ended June 2020, Sechaba’s share of profit from its two associates dropped by almost 60 percent to P40 million, down from last year’s corresponding revenue of P96.6 million.

KBL – which manufactures, imports and distributes alcoholic beverages – registered a 39.8 percent decline in volumes sold, while soft drink maker CCBB’s volumes sold in the first six months of the year decreased by 8.2 percent. The decline between the first and second quarters of the year was 76 percent for KBL and 20 percent for CCBB, corresponding with the nationwide lockdown that was put in place at the end of the first quarter and stretched for most of the second quarter.

KBL’s profit before tax fell by 72 percent to P55.8 million, while CCBB’s pre-tax profit was down by 17 percent to P39 million. Sechaba’s share of profits after tax from KBL and CCBB plunged by 60 percent, registering P35.2 million, down from June 2019’s profit after tax of P87.3 million.

“The well-intended interventions that the government of Botswana has put in place since April 2020 to fight the Covid-19 pandemic have negatively impacted the business performance of our associates,” said Thabo Matthews, the managing director at Sechaba.

The alcohol industry has been vocal about the government’s hard stance to prohibit the sale of alcohol during lockdowns, citing lack of correlation between the consumption of alcohol and the rise in cases of coronavirus infections. Besides lost sales that run into millions, the liquor sellers have complained of stock losses due to expiration, while the government also loses out on alcohol levy and value added tax (VAT).

In addition, the trade, hotels and restaurants, the biggest contributor to gross domestic product (GDP), has recorded a significant contraction, with the sector’s thousands of workers facing a bleak future. KBL at some point announced a 10 percent cut to staff wages during the second lockdown in August that stretched for two weeks, but with alcohol sales banned for almost a month.

Sechaba has announced that it will not be declaring a dividend to shareholders for the period under review due to its associates’ decision to delay dividends to allow for liquidity management in weathering the storm. The government is a shareholder in Sechaba through Botswana Development Corporation.

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The Telegraph October 28

Digital edition of The Telegraph, October 28, 2020.