Sechaba Brewery Holdings Limited, which owns 60% of Kgalagadi Breweries Limited, expects its pre-tax earnings for last year to be nearly double the 2017 figure of P112 million, breaking a 10-year streak of plummeting profits.
KBL is Sechaba’s sole investment and the holding company’s results are directly linked to the beverage manufacturer’s own performance. Global beverage giant, Anheuser-Busch InBev holds 40% in KBL and a separate direct stake of 16.84% in Sechaba.
Each year since the introduction of the alcohol levy in 2008 and subsequent liquor trading restrictions, Sechaba has issued profit cautionaries to investors warning of falling profits. However last week, the holding company issued a profit cautionary advising investors of higher profits, the first such notice the battle-weary stockholders have received in a decade.
In a statement to investors, Sechaba directors said the pre-tax profit for the year ended December 2018 was expected to be between P95 million and P108 million higher than that for the previous corresponding period. The figures translate to an increase of between 85% and 97% more than the 2017 pre-tax profits.
“The information contained in this announcement represents only a preliminary assessment made by the Board based on the information made available to the Board as at the date hereof. The actual results of the Company for the financial year ending 31st December 2018 may be different from what is disclosed herein,” the directors said.
KBL has battled to stay afloat for the last 10 years, as government increased the alcohol levy nearly every year until it reached 55%.
However, following his ascension last April, President Mokgweetsi Masisi ordered a review of the levy, which, in October, resulted in a reduction to 35% easing the pressure on beverage manufacturers and the industry as a whole.
Despite the levy’s reduction, KBL chose to stick to its prices saying it was covering years of shortfalls. Government has promised additional reviews of the levy, in consultation with Batswana.