Records 27 percent revenue decline
Sechaba Brewery Holdings has blamed the 30 percent alcohol levy imposed a year ago for the steep slide in the first half sales. The country’s largest brewer has recorded a 27 percent revenue decline and has described it as one of its worst financial performances.

The group recorded one of the worst financial performances as a result of a multitude of factors that affected the performances of the underlying operating companies, Botswana Breweries (Pty) Ltd (BBL) - especially in the second quarter of 2009 - and Kgalagadi Breweries (Pty) Ltd (KBL). “The slowdown in consumer spending on alcohol products following the introduction of the levy, coupled with the economic downturn led to the current performance,” says Sechaba.Substantial declines in the clear beer and sorghum beer sales, resulted, mainly due to the 30 percent alcohol levy introduced during November 2008 in the poor financial performance as operating profit fell by 29 percent in the six months to September.The group announced that turnover was down to P553 million while profit before tax was down from P155 million to P111 million.The company also attributed the decline in revenue to a severe recession in a nation of 1.8 million people, where diamond sales account for nearly 40 percent of output. “Sales volume of clear beer and sorghum beer declined by 35 percent and 14 percent, respectively. In addition to the levy, the sales performance was also affected by recessionary economic conditions and unusually cold weather,” the company said.In its results statement, Sechaba doubts whether the legislation has led to an overall cut in alcohol consumption, saying it had seen "large-scale migration" to stronger and cheaper drinks instead.The trading outlook for the next six months is tough, with proposed regulations on traditional beer expected to have a further impact on sales, the company said. The 30 percent levy on alcohol is expected to dampen volume growth in the year end results next year.However, analysts believe the implementation of public and private sector projects will help boost volumes in the medium to long-term and expect the levy to wear off by next year. “We expect trading conditions to remain tough during the next six months.” The proposed traditional beer regulations are expected to have a further impact on BBL sales during the coming months. Upward trends on the prices of fuel and the inflation rates in the country will maintain pressure on costs. The operating companies will continue to explore ways to keep costs lower and abate the impact of currency fluctuations.”Comparing the period under review with last year September 2008, it is evident that before the introduction of the levy the company performed well but this year there were a lot of impediments.Announcing its year end results early this year, Sechaba Holdings said that due to the 30 percent levy that government imposed on alcoholic beverages last November, it is evident that consumers have shifted to traditional brews like Chibuku, instead of the more expensive clear beer. The company suffered losses as sales dropped by 16.4 percent in the second quarter of 2009, after going up by nearly 16.9 percent before the levy was introduced. Overall, clear beer sales volumes were 0.5 percent down.”By NCHIDZI SMARTS