Sechaba exults sales growth but glum about future

Staff Writer
Brewing giant, Sechaba Brewery Holdings has posted a positive set of interim results for the period ended 30 September 2008, something that will be hard to repeat due to an anticipated slump in sales resulting from the 30-percent alcohol levy.

The results were on the back of good performance by its associate companies, Kgalagadi Breweries Limited (KBL) and Botswana Breweries Limited (BBL).

KBL delivered a year-on-year growth of 13.8 percent in attributable profit. This was driven by good performance in volumes in which clear beer sales went up by 17.0 percent while carbonated soft drinks (CSD) increased by 11.4 percent.

BBL posted an attributable profit growth of 21.2 percent in which traditional beer sales were up 15.5percent while Mageu recorded a growth of 13.8 percent.

But the recently implemented 30-percent levy on alcohol is expected to dampen volume growth in the short-term. However, analysts believe the implementation of public and private sector projects will help boost volumes in the medium- to long-term, although currently prevailing high levels of inflation have an adverse effect on disposable income and volumes.

"We believe that inflationary pressures will abate in the first quarter of 2009. With volumes expected to drop, it is very crucial for the company to manage its costs in a more stringent manner in order to protect margins," says a report by Stockbrokers Botswana.

"Implementation of public sector projects will help to boost the level of disposable income. This is despite setbacks in some of the projects like the Activox Refinery in Francistown and the Mmamabula Energy Project (MEP).

"Projects like the construction of the Botswana International University of Science and Technology (BIUST), the Nata-Kazungula road and bridge, the expansion of the runway and terminal building of the Sir Seretse Khama International Airport, the upgrading of Maun and Francistown airports and other public works are expected to create employment in the short-, medium- and long-term."

On a consolidated basis, sales grew by 33.2 percent to P734.9m, while gross profit increased by 12.9 percent to P260.1m. However, gross margins dropped by 6.4 percentage points

to 35.4 percent. This was driven by, among others, the depreciation of the local currency that resulted in an increase in cost of sales.

Profit after tax rose by 22.4 percent to P143.8m. Sechaba's share of results of associates went up by 13.9 percent to P93.3m, while its profit after tax rose by 16.4 percent to P73.7m.

However, Stockbrokers Botswana is advising investors to reduce their holdings on the counter due to a cloudy outlook resulting from the recently imposed 30-percent levy on alcohol, which is expected to dampen profitability of the brewing giant in the short- to medium-term.

Sechaba says economic and trading conditions remained a challenge during the period under review. Inflation remained way above the Bank of Botswana's medium target range of 3 to 6 percent, driven mainly by the rise in fuel prices on international markets.

"High levels of inflation, coupled with the depreciation of the pula against major currencies, have resulted in high cost of sales," the company says. "This has resulted in a significant drop in gross margins.

"Price increases that were effected towards the end of (the) 2008 financial year could not fully cushion margins as alcohol is a price sensitive commodity. Given that a significant portion of the company's inputs are imported, the depreciation of the pula against major trading partner currencies also places significant pressure on costs and negatively affects profit."

In addition, the global financial crisis will affect beer sales volumes in the medium- to long-term. "Given that Botswana exports its diamonds to the affected countries, we expect a decline in the growth of diamond revenues," Sechaba says.

"Government spending on infrastructural projects may drop as a result, leading to lower levels of disposable income in the economy. Demand for luxury products such as alcohol may drop as a result."

Banners ?>


You are corrupt and o tlwaela Batswana. Bona selo se sentsho se!

Latest Frontpages

Todays Paper Todays Paper Todays Paper Todays Paper Todays Paper Todays Paper
Adana Escort Adıyaman Escort Afyon Escort Ağrı Escort Aksaray Escort Amasya Escort Ankara Escort Antalya Escort Antep Escort Ardahan Escort Artvin Escort Aydın Escort Balıkesir Escort Bartın Escort Batman Escort Bayburt Escort Bilecik Escort Bingöl Escort Bitlis Escort Bolu Escort Burdur Escort Bursa Escort Çanakkale Escort Çankırı Escort Çorum Escort Denizli Escort Diyarbakır Escort Düzce Escort Edirne Escort Erzincan Escort Elazığ Escort Erzurum Escort Eskişehir Escort Giresun Escort Gümüşhane Escort Hakkari Escort Hatay Escort Iğdır Escort Isparta Escort İskenderun Escort İstanbul Escort İzmir Escort İzmit Escort Karabük Escort Karaman Escort Kars Escort Kastamonu Escort Kayseri Escort Kıbrıs Escort Kırıkkale Escort Kırklareli Escort Kırşehir Escort Kilis Escort Kocaeli Escort Konya Escort Kütahya Escort Malatya Escort Manisa Escort Maraş Escort Mardin Escort Mersin Escort Muğla Escort Muş Escort Nevşehir Escort Niğde Escort Ordu Escort Osmaniye Escort Rize Escort Sakarya Escort Samsun Escort Siirt Escort Sinop Escort Sivas Escort Şırnak Escort Tekirdağ Escort Tokat Escort Trabzon Escort Tunceli Escort Urfa Escort Uşak Escort Van Escort Yalova Escort Yozgat Escort Zonguldak Escort Alaçatı Escort Aliağa Escort Alsancak Escort Bornova Escort Buca Escort Çeşme Escort Çiğli Escort Gaziemir Escort Karşıyaka Escort fethiye escort iskenderun escort iskenderun escort iskenderun escort iskenderun escort iskenderun escort