Sechaba Brewery profits halve

Isaac Pinielo | Wednesday May 3, 2017 15:58

Total volumes for the nine months period were 1,670,194 hectolitre from 1,699,166 hectolitre of the prior period, which is a 1.7% drop.

According to Sechaba, the decline in the financial performance was mainly attributable to the current challenging regulatory environment in which the company operates under.

However, management said the company’s associate remains commercially sound with stable consumer demand and improved efficiencies.

Market watchers believe that the acquisition of SABMiller Plc by Anheuser-Busch InBev (AB InBev) may have also factored in the performance of company.

Garry Juma, a market analyst at Motswedi Securities said with this acquisition, it is going to get worse before it gets better for the national brewer. He said the company is going through a difficult time and that with the recent changes to the company, its troubles are far from over.

“It is still early to say what they are going to do to fill the gap that has been left by termination of the contract with TCCC,” he said.

Donald Motsomi, research analyst at Stockbrokers Botswana said the loss of KBL’s bottlers agreement with TCCC were warning signs that with the ABInbev acquisition of SABMiller, investors can expect extended periods of uncertainty surrounding the beverages giant.

“We anticipate a lot of investors will be in ‘wait and see’ mode, while any further changes from the acquisition could potentially have a material and adverse effect on the group’s business.” Meanwhile, Sechaba’s securities were recently under threat of suspension and possible termination from the Botswana Stock Exchange (BSE) as the company had failed to publish its audited financial statements within three months of its financial year-end.

The company had earlier on issued a cautionary announcement stating the reasons for its failure to publish its reviewed financial statements.

It had stated that the notice from The Coca-Cola Company (TCCC) that the bottlers’ agreement in accordance with which KBL produces products licensed to TCCC, will be terminated, triggered specific accounting treatment consideration in the financial statements of KBL for the reporting period ended December 31, 2016.

“The manner, timing and impact of the aforesaid termination remains the subject-matter of ongoing negotiations and consultation with various stakeholders,” it said.

“These negotiations had not been completed by 31 March 2017 (the initial date for the publication of results), and are still on-going and pending conclusion”.

The company however managed to fulfil the BSE listings requirements and released its results last week for the nine months ended December 31, 2016.