Levy wipes off P175m on KBL profits


Troubled beer brewing firm, Kgalagadi Breweries Limited (KBL) has lost a staggering P175 million to the Alcohol levy, during the six months ending June 30 2018, Managing Director (MD) Renaud Beunchamp revealed.
Since former President Ian Khama introduced the alcohol levy in 2008, it has been an impediment to KBL, wiping off profits and reducing sales, while share price and market value also took a hit.
According to the company’s latest financial statement on the Botswana Stock Exchange (BSE), KBL reported ‘profits before alcohol levy’ of P281 million. After the deduction of the alcohol levy, KBL registered a profit before tax of P105.6 million.
The difference between the profit before alcohol levy and the profit before tax translates to P175.1 million, which it appears is the cost of the alcohol levy.
As a result of P175 million alcohol levy and P28 million tax liability, KBL’s profits declined by 14.2 percent.
The decline in profits according to Beunchamp is, “due to increased alcohol levy, additional deferred tax resulting from timing difference of the accounting and tax base of property and equipment.”
In the six months up to June 30, KBL’s the total volume increased by 8,2 percent compared to the prior year. Beunchamp said this was driven by increase in volume and mix and differences in the operations of the business.
KBL sold 984.8 million hector litres of alcohol, an 8.2 percent increase from the 2017 period.
KBL has been on an inexorable decline since the inception of the alcohol levy. The company used to be amongst the top five most valuable companies listed on the BSE.
It no longer graces the list of that top five by market capitalisation. A few years back, KBL’s market value was measured at over P4 billion.
According to latest information provided by Motswedi Securities, the company slipped to an abashing P2.5 billion in market cap wiping out close over 35 percent (an equivalent of P1.5 billion) of its market value.
By December 2016, the sole beer brewing firm was selling at 2700 thebe per unit, one of the highest share prices amongst domestic listed companies. KBL now traded 1900 thebe per share, a significant decline.
Stockbrokers like Moemedi Mosele at Motswedi Securities believe that the fall in Sechaba’s share price is an effect of skepticism by investors who are still unhinged by developments that followed the takeover by Anheuser-Busch InBev (AB InBev), which bought out SABMiller. The latter and The Coca-Cola Company jointly owned Coca Cola Beverages Africa (CCBA), which had operations in Southern Africa.
Further, he said the poor performance of the company, as a result of the alcohol levy also plays a part in the shrinking value of KBL.