Sefalana’s diversification strategy spurs its financial performance

In the half-year period concluding on October 29, 2023, the group reported a profit after tax of P154.4 million, reflecting a 7 percent increase from the P142 million recorded in the previous corresponding period.

“We have been able to execute these impressive results largely due to our diversification strategy across the sectors and the region,” explained Mohamed Osman, Sefalana group finance director.

“We continue to note the challenges, but because of the perseverance and dedication of our teams across the group, we managed to excel nonetheless.”

Some of the challenges include the cost of raw materials, which has impacted the manufacturing division of Sefalana, as well as inflationary pressures, leading to consumers changing their spending patterns.

“We experienced a lot of procurement issues from South Africa,” said Osman.

“We have had regular discussions with the suppliers about this.”

As a result, Osman disclosed that in the last 18 months, Sefalana has increased its inventory investment by an excess of P100 million.

“Raw material availability is also a challenge, particularly in Botswana,” said Botswana.

“Overall customers demand a one-stop shop, so we are trying to extend that in all our stores.”

Osman noted that Sefalana is proud that the results reported are supported by a strong ESG approach, which he said is becoming increasingly important in the global arena.

“We have made specific efforts to ensure that whatever we do in is line with ESG best practice,” he said.

During the period under review, Sefalana’s performance was largely supported by Botswana’s business units which contributed 65 percent of the group’s Profit before Tax (PBT).

Overall, Botswana’s business units which represent about two-thirds of the whole group business, generated P134 million PBT for the period, compared to P120 million in the prior period.

While challenges such as the COVID-19 protocols have subsided for the Fast Moving Consumer Goods (FMCG) business in Botswana, Sefalana highlights that new difficulties have arisen due to restrictions on the importation of specific confectionery, fruit, and vegetables.

Sefalana says these restrictions have resulted in many supply shortages for its customers which is expected until the country’s agricultural sector is able to meet local requirements.

At the end of the current reporting period, Sefalana’s local FMCG business unit consisted of four hyperstores, 25 cash and carry stores, 32 supermarket retail stores, 58 liquor shops, four convenience stores and, one catering outlet, making a total of 124 stores in Botswana.

This compares to 118 stores at the end of the comparative period.

In Namibia where Sefalana operates under the Metro brand, the business contributed 33 percent of revenue and 30 percent of PBT for the period.

Turnover amounted to P1.6 billion, a growth of 3 percent on the prior period, while PBT amounted to P62 million, in line with the prior period.

At the end of the reporting period, Sefalana had a store complement of 25.

In Lesotho where it operates four stores, turnover amounted to P405 million, whereas PBT of P6 million was generated.

According to Osman, Sefalana’s investment in Australia continues to generate positive EBITA and cash.

The group currently operates 10 stores across Brisbane under the Seasons IGA brand.

During the period, its share from these operations amounted to a loss of P7.4 million, with the economy of that country reportedly experiencing strain.

Sefalana expects this associate to break even by the end of the 2027 financial year.

In terms of manufacturing, Sefalana’s subsidiary, Foods Botswana, contributed 4 percent and 14 percent to the group turnover and PBT respectively.

The group has stated that the profitability of this business is largely dependent on the timing of orders placed by the government in respect of the various feeding schemes and the availability of raw materials.