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Sechaba Profits up 118 %

Publishing Date : 07 October, 2019

Author : ALFRED MASOKOLA

Botswana’s premier brewer and beverages conglomerate Botswana Stock Exchange listed Sechaba Brewery Holdings Limited(SBHL) has posted sterling performance figures for its half year trading period ended 30 June 2019, unaudited financial results released last week reveal.


The Group which owns 49.9 % stake in alcoholic drinks outfit Kgalagadi Breweries and soft drinks giant Coca Cola Beverages Botswana experienced significant growth in overall volume registering a 14 % hike during the first six months period of 2019 with all categories recording modest to significant increase except Traditional Beer segment which experienced volumes decline.


This increase in traded volumes for all other segment coupled with high net revenues and benefit from overall savings in cost pushed profits during the period to a splendid 118 % growth when gauged against the corresponding period in the prior year. Sechaba directors noted in the financial results that each segment of the business is doing significantly better as separate entities owing to focus on specialized area and focused marketing distribution efforts.


Zooming into financial highlights per investment in associates shows that Kgalagadi Breweries Limited (KBL) volumes increased by 6 % from 669 000 hectoliters to close the period at 707 200 hectoliters. On the financial figures KBL experienced  ballooned upswing as profits before tax went up 122 %  from P88.5 million recorded in 2018 H1 to close  the first half of 2019 at over  P196 million. The premier alcoholic brewer paid the taxman over P39 million compared to P20.2 million in the prior period to end the half year at over P156 million Profits after taxation against P68.3 million mirroring 129 % increase.


For Coca Cola Beverages Botswana (CCBB), volumes went up by 33 % to close the six month period at 418 800 hectoliters from 315 800 recorded at 2018 H1 end. This resulted in 191 % pick up in profit before tax for the business which is involved in the manufacturing, import ,distribution and marketing of a portfolio of soft drinks , purified water and other non- alcoholic beverages. CCBB  raked in over P46.7 million  before paying the taxman P9.6 million  to close the half year end at P37.175 million.


This is against P16 million profits before tax registered in H1 2018 and P8.7 million taxation representing the 191 % and 10 % increase respectively.  Against the P7.3 million take home recorded in 2018 half the 2019 figure of P37.175 million mirrors a sterling 404 % growth year on year. On the overall Sechaba operating profits increased by 116 % from just over P44 million recorded at 2018 H1 end to P95.4 million 2019 H1 figure.


Following an agreement between AnheuserBusch InBev (AB InBev) and The Coca Cola Company(TCCC)   for the latter to acquire the non –alcoholic ready –to –drink business segment of Kgalagadi Breweries early last year  ,on the 3rd of July 2018 the  two companies entered into a Master Purchase Agreement in terms of which the Sellers have agreed to dispose of their interests in KBL’s business of preparing , packaging , distributing , promoting and selling of  non –alcoholic ready –to –drink beverages with exception to Mageu .


 It was later announced that an agreement was reached that in essence separated and transferred Non –alcoholic ready to drink (NARTD) assets from Kgalagadi Breweries Limited  into Coca Cola Breweries Botswana  putting Sechaba Breweries Holdings Limited at 49.9 % shareholding in KBL and the same percentage stake in CCBB.


AB InBev has management control over KBL, offering insight and experience with regard to management, technical, brand building and distribution expertise. KBL operates four traditional beer breweries, a clear beer brewery, a sparkling soft drinks production plant and four sales and distribution depots around the country. Botswana Development Corporation, wholly government owned investment entity owns 25.59 % stake in Sechaba Breweries  Holdings Limited while Botswana’s largest Pension fund  BPOPF holds a significant stake of over 20 % through its different assert managers . AB InBev has direct shareholding on Sechaba as well as KBL.


EMERGING FROM ALCOHOL LEVY DEPRESSION

In the prior year’s Kgalagadi Breweries which has been the sole investment of Sechaba holdings was hit by downturn and compressed figures  at the hands of amongst others  Alcohol levy. At 2018 half year 1 the company‘s profits after taxation mirrored a 14.2 percent contraction compared to the 2017 first half performance. Sechaba Company cited the levy as the forefront factor in depressed take home figures.


During the last 2 financial years before review of the levy in October 2018 Sechaba Holdings boldly outlined that the taxation was significantly hurting company financials year and year out .Alcohol levy was introduced in 2008 .The levy rate for alcohol content of 5%  and less was sitting at 50% and for alcohol content of above 5% at 55%. Additionally the calculation for the levy on locally produced alcoholic beverages included excise duty payable in terms of customs and excise Duty Act. In October last year Government took a major decision at cut the levy by 20 % to 35%

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