E-Malt.com News article: Botswana: Brewer Sechaba Holdings regains some lost market share in the year to March 2012

Botswana Stock Exchange (BSE) listed brewery, Sechaba Holdings, says it has begun to regain its lost market share due to the correction in the application of the alcohol levy, MmegiOnline reported on June, 1.

Announcing its results for the year ended 31 March 2012, Sechaba says following years of declining demand as consumers turned to cheaper imports, total sales for the year grew by 6.8 percent in the period under review.

"Sales for KBL, which was hit harder by the levy imbalance, grew by 8.6 percent and BBL products sales rose by five percent. Our alcoholic beverages brands continued to regain market share during the year, benefiting from the correction in the initially flawed levy calculation model, which resulted in a levelled playing field.

Notwithstanding the recovery, both market share and volume performance are still significantly below pre-levy levels," reads the statement.

Since the introduction of the levy in 2008, Sechaba products have suffered significant weaker demand, particularly the flagship St Louis brand, as consumers turned to the cheaper imported brands.

In 2010, Sechaba recorded one of its worst financial performances in recent history, a 25 percent decline in profits with clear and sorghum beer sales slumping 26.2 percent and 7.8 percent respectively. In the 2012 financial period, Sechaba posted a 22 percent rise in revenue to P1.5 billion following a 6.8 percent rise in total sales volume.

According to the company, the difference in growth rates of revenue and sales volume was caused by the inclusion of the alcohol levy which was previously treated as sales tax and not included in the group's turnover. Net profit for the year grew by 17 percent to P280 million whilst basic earnings per share edged up to P1.22 from P1.01 the previous year. Sechaba has declared a net final dividend of 17 thebe per share payable on 29 June 2012 to all registered as shareholders on 22 June 2012.

"Increased distribution costs, due to the high sales of returnable glass bottles, affected operating profit for the year. Notwithstanding, operating profit still grew 16.7 percent ahead of the prior year, the first incremental growth since the introduction of the levy," says Sechaba.

The company further says higher fuel costs and the increase in sales of returnable glass bottles continue to drive up costs and will have further impact in 2013. However, Sechaba expects the increased volume share in these bottles to give the company a competitive advantage and is thus a worthwhile investment. On the impending ban of Chibuku in residential areas, the company says it has invested significantly in the construction of beer gardens.

"We continue to invest in beer gardens in an attempt to accommodate displaced retailers. Land availability is however proving to be the rate-determining step resulting in less than planned outlet development. This poses a serious problem for volumes when the traditional beer regulations are implemented on July 1, 2012," the company says.

The company says it has set aside P10 million to mitigate the impact of the proposed traditional beer regulations.


06 June, 2012