Tanzania brewer records 3pc drop in profits

Tanzania Breweries Ltd has announced a three per cent drop in profits for the period ending December 31, 2019, as it discontinued traditional beer business run by its affiliate Darbrew Ltd.

According to the Dar es Salaam Stock Exchange listed company's 2019 end-year results released this week, revenues decreased by five per cent with a significant decline being recorded in affordable brand segment.

Darbrew Ltd manufactures affordable drinks like Chibuku whose once-high popularity appears to have declined sharply, leading to TBL's decision to scale down production.

According to TBL managing director Philip Redman, the company's operating profit went up by five per cent as a result of increased productivity, lower brewing and packaging raw material costs, logistical efficiencies and lower overhead costs.

“As a result, our operating margin was 21 per cent which increased by five per cent from prior year. The group continues to drive the strategy of more affordable packs to enable more consumers to switch out of the informal sector,” Mr Redman said.

TBL's total capital expenditure investment for the year amounted to Tsh64.178 billion ($27.9 million) compared with Tsh111.966 billion ($48.7 million) in 2018.

The company’s reported cash generated from its 2019 operations was Tsh297.107 billion ($129.2 million) compared with Tsh303.392 billion ($132 million) from the previous year, of which Tsh273.188 billion ($118.7 million) was spent on corporate income tax, paying dividends and fulfilling other financing obligations.

“The remaining funds have been retained for future activities,” Mr Redman said.

First listed on the DSE in September 1998, TBL is one of the Dar bourse's recognised heavyweight domestic listings, with a current market capitalisation of Tsh3.214 trillion ($1.4 billion) and the second highest share price on the exchange Tsh10,900 or $4.75 as of Monday this week, behind only Tanzania Cigarette Company (TCC) at Tsh17,000 ($7.40).

The brewer's current share price is down 4.39 per cent over the same period last year, and below Tsh16,600 ($7.22) high that it hit in July 2018.

Although the effects of Covid-19 on beer and alcoholic beverage sales have not been quantified, most bars and other selling points around the country have reported a decline in business as a direct result of the crisis.

Future revenues may also be hurt by a new alcohol control law passed by Zanzibar House of Representatives this week seeking to limit the scale of importation, storage, sale, distribution and consumption of alcohol in the Isles, including imposing 25 as the age limit for people to sell or consume alcohol.