Sefalana Holdings completes turnaround

Staff Writer | Friday January 15, 2010 00:00

Sefalana holds exclusive or part equity in Sefcash, Foods Botswana, MF Holdings, Kgalagadi Soap Industries, Commercial Motors and a range of other interests in industries such as timber, mechanised farming, travel and tourism and property.

In 2006 - after a three year battle -Sefalana won an acrimonious court tussle to cut ties with its partner in Metsef, Metro, following disagreements over the efficient and profitable management of the joint venture. Sefalana, led by its Group Managing Director, Chandra Chauhan, was convinced they could do a better job of steering Metsef to profitability, if the management contract was taken away from Metro, a South African group.

Since the legal victory late in 2006, Sefalana has successfully rebranded Metsef into Sefcash, boosted the wholesale subsidiaries' profits and spread the local brands footprint to 26 outlets and two hyper stores. Simultaneously, strategists at Sefalana were able to return profitability to subsidiaries such as Foods Botswana, MF Holdings and KSI Holdings.

Indicative of the turnaround, Sefcash and Foods Botswana have emerged as the jewels in Sefalana's crown, contributing generously to the holding company's bottom line and enabling it to establish a distribution business in Zambia last year. Foods Botswana performance is particularly pleasing to Sefalana as its turnaround coincided with the victory to control Sefcash, following the battle with Metro.

Chauhan and his lieutenants at Sefalana are pleased with the manner in which the holdings giant has emerged from the troubles of 2006.

'While we were working on the turnaround of Foods Botswana, we also set about regaining control of our wholesale operations (Metsef/Sefcash) which were wilting under what we believed were extremely unfavourable conditions as a result of the control by the South African-based shareholder, Metro.

'So we fought a protracted legal battle with Metro for three years and eventually managed to buy them out - and Sefcash has never looked back,' said Chauhan.

Today, Sefcash is the domestic leader in the highly competitive Fast Moving Consumer Goods (FMCG) arena, with the arsenal of cash and carry outlets and hyper-stores all at wholesale level. Sefcash also has 400 voluntary retail franchise members and a portfolio of powerful local branded products.

Last year, Sefalana unveiled Shoppers, a chain of wholly- owned retail outlets, which upped the stakes in the FMCG retail arena, already staggeringly competitive.

Shoppers' outlets have been opened in Mochudi and Letlhakane, with a further nineteen stores planned over the next three years. Already, the outlets are proving popular with an estimated 6, 672 customers walking into the Mochudi store upon its official opening.
'A firm platform has been laid (through the opening of Shoppers' outlets) and real and bottom line growth can be expected in the longer term,' said Sefalana's Group Finance Director, Venkit Iyer, while acknowledging that prospects for the financial year ending in April could not be accurately forecast.

For the 2008/09 financial year, Sefcash's turnover increased by 26 percent, while profit before tax rose by 119 percent, contributing healthily to Sefalana's record profit for the year of P72.5 million, from P37.7 million 2007/08.

With the exclusion of Sefcash, Sefalana's business ethos has been to purchase under performing businesses and turn these around through the injection of the vibrant management strategies that underpinned Sefcash's revolution.

Foods Botswana has been turned around from a frequently loss-making operation, into a multi-million Pula operation that holds lucrative government tenders in the area of feeding schemes. Foods Botswana now has a strong market presence with products ranging from sorghum, soya and maize-based offerings.

The 2006 turnaround also involved the purchase of a controlling stake in MF Holdings Group, transforming the business from its profit of P1 million that year, to P12 million in the 2008/09 financial year. MF Holdings owns Commercial Motors, Mechanised Farming and Vintage Travel and Tours, all of which have experienced growth in the three years since Sefalana's legal scrapes.

Sefalana's property business and its 50 percent equity in Kgalagadi Soap Industries (KSI), have also seen value growth over the years. Prior to 2006 when Sefalana took up equity, KSI was riddled with liquidity challenges, but at present, the soap, detergent and refined oil company is back to profit making paths.

It is estimated that brands such as Marang, Snowkiss and Oodi control up to 50 percent of the local market.

It has not all been roses during Sefalana's turnaround. The company is considering its options regarding the loss-making Seftim venture, which is a supplier of builders hardware.

Sefalana has a 50 percent stake in the venture, but as the company has been producing disappointing results, 'future participation in this business is under review.'

In addition, Sefalana Home and Liquor Store in Orapa, in which the diversified holding group has 49 percent equity, suffered from the effects of the closure of Orapa Mine, Damtshaa Mine and Orapa No. 2.

However, sales and profitability picked up after April this year, when Orapa resumed operations and the business is expected to remain afloat.

Chauhan explained that the secret to Sefalana's turnaround lies in its operating policy.
'We will continue to run our business efficiently and strive for profits by increasing efficiencies rather than prices.

'This policy has already had a remarkable effect on our number and we are convinced that further efficiency improvements will translate into greater rewards for our shareholders.

'If we can keep the momentum going, if we build on our culture of discipline and professionalism, and if we remain focused on our strengths, I am confident that Sefalana will achieve its goals and remain a role model for businesses in Botswana and further afield,' he said.