KBL profits drop 23%, volumes down 29%
Kgalagadi Breweries Limited (KBL) recorded a 23% drop in pretax profits last year to P286.3 million, as volumes fell 29% on the back of several sales suspensions effected by the government to curb the coronavirus (COVID-19).
Alcohol was sold for just 183 days out of a total possible 286 days between March 21, 2020, and December 31, 2020, while the year 2021 has seen 56 days without any sales. Government and its advisors say alcohol gatherings are a major spreader of the virus.
The impact of the sales interruptions on KBL were clear with the alcohol producer reporting that its sales volumes fell from 1.54 million hectolitres in 2019 to 1.1 million hectolitres in 2020. The difference between the two figures is about 44 million litres.
The numbers are, according to full-year results released recently by Sechaba Holdings, a 49.9% shareholder in KBL. Sechaba also holds 49.9% in Coca-Cola Beverages Botswana (CCBB). According to the Copyright and Intellectual Property Authority database, Sechaba’s shareholders include state investment agency, Botswana Development Corporation, which holds about 32.7% equity.
“These results are attributed to the measures taken to control the spread of the COVID-19 pandemic in Botswana such as the cancellation of the sale of alcohol and the reduction in operating hours of restaurants and other outlets that would otherwise have traded in the products of the company,” Sechaba directors stated.
“As a result of this performance, only CCBB declared a dividend this financial year whilst KBL did not declare a dividend as the operating environment remains uncertain.
“A more conservative approach has been taken by KBL to focus on cash preservation.”
KBL on Tuesday advised its extensive downstream base of price increases to take effect from April 1, 2021. The alcohol producer said the new prices were to cater for inflation and other cost increases such as the recent Value Added Tax increase.
Meanwhile, Sechaba continues its downward slide on the Botswana Stock Exchange (BSE), now being ranked the third biggest loser for the year. As at the opening of trade on Tuesday, Sechaba was down 15.7% in the year-to-date, having shed P3.25 since the beginning of the year.
Analysts previously told BusinessWeek the liquor trade suspensions and operations restrictions had led to more investors looking to sell than buy Sechaba’s shares given the industry’s uncertainty.
“I believe the uncertainties around the alcohol industry heightened, hence investors are now reacting,” Malebogo Keleapere, Stockbrokers Botswana research analyst, said.
“There is usually a gap between events, news and investors’ reaction (which is) perhaps the reason why the negative impact of the above-mentioned issues is only being felt significantly now.”
Other market analysts told BusinessWeek the fall in Sechaba’s share price was likely linked to bargain hunters testing how low the counter could get before taking positions. “Sometimes, investors play that game where they are looking at a future purchase of a block of shares and ahead of that, they test or press the price down with small volumes,” a market watcher said.
“The idea is to test how low the price can fall before taking a position.” Sechaba directors, meanwhile, said their investment in CCBB would also come under pressure from the April 1 introduction of the new sugar levy. Directors said the levy would have a ‘significant impact’.
“Notwithstanding, the associates are confident that the global and national efforts to rid the world of the coronavirus will bear fruit in future and therefore will position the businesses to be able to operate normally going forward,” the directors stated.