Zambian Breweries records huge losses due to PF bad taxes

Every sector of the economy is feeling the impact of poor leadership.

The 50% increase in clear beer excise tax has significantly affected the profitability of Zambian Breweries which has seen the company record a 25 percent loss.

The excise tax which was increased on 1st January 2014 coupled with sharp depreciation in the kwacha saw the company’s profit after tax fall from K175, 478 million to K131, 837 million.

This is according to the company’s final results for the year ended
31 March 2015 released on Tuesday.

‘Disappointingly, our poor financial performance compelled us to declare 122 positions redundant in the year and the resultant costs of this exercise are reflected in our overhead costs for the year,’ the statement read.

Its mainstream 375ml Mosi, Castle and Carling Black Labels volumes declined by 23% in the first three quarters of the year.

The firm majority owned by SABMiller said the significant decline in volumes following the excise related price increase in January, and the growth of the economy offerings, has confirmed how sensitive Zambian consumers are to price increases and how important affordability is in the current economic environment.

‘We mitigated this decline by aggressively launching a 750ml bulk economy offering in Mosi and Castle in the last quarter and by driving our economy brand, Eagle. In addition, we took the difficult decision in the last quarter to reduce the price of our 375ml Mosi,Castle and Carling Black Label packs from K6.5 to K6,’ it said.

‘While our volumes recovered to some extent to record a smaller decline for the year of 8%, the measures we took to achieve this have significantly impacted our margin.’

It said as a result of the volume decline, our barley crop requirements were cut back to 8,000 tons for the year adding that in previous years, it contracted 12,000 tons on average.

‘Our beer has become the most expensive in the region owing to the higher taxes, and competition from smuggled beer is now a more credible threat,’ the statement read.

It added that more smuggled Castle Lite is now sold in Zambia thanCastle Lite sold by Zambian Breweries Plc.

‘This demonstrates a genuine loss of revenue to Government and is a major threat to our business.’

‘We are pleased to report that soft drinks showed a healthy performance and grew 10% on prior year on the back of improvedavailability and a real focus on market trade execution.’

It added, ‘We continue to engage with Government and key stakeholders on how we believe we can contribute more to the economy by way of investment, employment and tax under a 40% clear beer excise regime rather than the current 60% regime, and are encouraged by Government’s willingness to consider all the issues put before them.’

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