Sefalana's growth dented by recession

Staff Writer | Tuesday February 2, 2010 00:00

The company, which holds total or part equity in Sefcash, Foods Botswana, MF Holdings, Kgalagadi Soap Industries and Commercial Motors has released a subdued set of interim results for the six months ended 31 October 2009 as the challenging macroeconomic environment resulted in lower spending and squeezed volumes and margins.

Distribution Subsidiary Sefalana Cash & Carry Limited (Sefcash) turnover dropped by 4 percent as the introduction of the 30 percent alcohol levy, a significant reduction in cross-boarder trade principally with Zimbabwe and Zambia, diminished overall performance.

' However, through containing costs associated with the running of the operation, Sefcash profitability  remains at par with the previous period. The opening of the supermarkets under the banner 'Shoppers' has been successful with good performance from these outlets,' said the company in a statement. Last year, Sefalana unveiled Shoppers, a chain of wholly- owned retail outlets, which upped the stakes in the FMCG retail arena.

The Shoppers' outlets were opened in Mochudi and Letlhakane, with a further nineteen stores planned over the next three years. Other subsidiaries such as MF Holdings (Pty) Ltd, Foods Botswana (Pty) Ltd and KSI Holdings (Pty) Ltd performed below expectations. MF Holdings performance was negatively affected by delays in the execution of the tenders awarded by the Public Sector, coupled with the slow down in the construction industry. Foods Botswana business was affected by the late award of the Tsabana and Tsabotlhe tenders, while KSI Holdings market shrunk due to depressed business in the trade.

As a result, turnover for the group fell by 11.1 percent to P831,3 million from P935.1m in the same period in 2008, while gross profit shed 13.8 percent to P66,9 million from P77.7million.

 The company however managed to contain costs in the period under review with distribution cost down 22.5 percent to P7.8 million from P10.0m in the corresponding period in 2008 but administration expenses rose by 6.5 percent to P35.8m from P33.6m. 
Operating profits came in 20.6 percent softer at P27.4million while profit after tax was 17.0 percent lower at P 19.7 million from P23.7 million. 

'The directors resolved not to pay any dividends in order to retain cash resources until the financial year end when a reassessment of the economic situation can be made,' said the company.

Looking ahead, Sefalana says its subsidiary, Sefcash is expected to experience the normal increased turnover in the second half of its financial year but margins are still expected to continue to be under pressure.

 'The Motor Vehicle subsidiary is also expected to grow as sales have begun to pick up with the new service centres for the MAN and HONDA vehicles anticipated to improve service levels and visibility of our product,' added the company.