ZAMBIAN Breweries Plc has posted huge losses of nearly K15.5 million in its half-year period ending June 30, 2020, mainly triggered by the kwacha’s rapid depreciation against major currency convertibles, which increased the company’s debt portfolio and hiked production costs.
But the company says it remains well-positioned for a strong recovery given its positive cash position of K185.8 million and commitment to cost management and financial discipline.
In a statement announcing its unaudited results of the company for the six-month period ended June 30, Zambian Breweries posted massive losses of around K15.5 million after tax in the period under review compared to earning K193 million in profit after tax during the same corresponding period last year, mainly due to the kwacha’s rapid devaluation against major currency convertibles, which pushed up the company’s debt portfolio as well as costs of production.
It posted heavier losses before tax of K68.3 million in the period under review compared to K243 million in profits before tax last year.
The local currency depreciated to close the second quarter at around K18 per dollar compared to trading at K14 per dollar by the start of the year.
“In addition to the limitation on trading activity, which led to a notable negative impact on business volume performance and revenue generation relative to budgeted activity, the material depreciation of the kwacha currency against major world trading currencies further resulted in price escalation of dollar-denominated raw materials for the business,” Zambian Breweries stated.
“Profit before tax fell significantly relative to PY (prior year) into a loss position. This loss was because of the significant unrealised foreign exchange loss that the business recognised following a revaluation of all outstanding group debt. This was in response to the massive devaluation of the kwacha in the first quarter of 2020 to reflect the correct value of this debt position. Further, pressure on profit before tax was due to an increase in cost of production driven by the weak exchange rate, which was reflected in the 16 per cent drop in current year gross profit.”
However, results during the period under review also reflected a four per cent increase in total volumes, driven by affordable beer brands.
“Total volumes grew four per cent driven by affordable beer brands. Customers favoured the affordable segment over core and premium brands as their disposable income was eroded by the difficult economic conditions. Total revenues grew five per cent owing to volume growth and lower excise tax on the affordable beer segment,” it stated.
And the company added that it remained well-positioned for a strong recovery given its positive cash position of K185.8 million.
“The first half of this year has tested all of us in many ways. We are inspired by the resilience of our people, our business, and the performance of the beer category despite the tough restrictions. Our company is well-positioned for a strong recovery. We have a diverse portfolio of resilient and valuable local and international brands, which enables us to reach more consumers on more occasions. The business remains liquid with a positive cash position of ZMW185.8 million,” stated Zambian Breweries.
Zambian Breweries Plc is a subsidiary of AB InBev, the Belgium-based brewer, which took over ownership of SABMiller in a US $100 million deal back in 2016, and assumed new ownership of Zambian and National Breweries Plc.
AB InBev also manufactures the globally-renowned Stella Artois and Budweiser beer brands, among others.