South Africa: South African Breweries set to dump 132 mln litres of beer if government does not permit to transport alcohol

South African Breweries (SAB) on May 7 called for the government to reconsider the ban on the sale and local transportation of alcohol as the coronavirus (Covid-19) epidemic crashed a strong performance in the first two months of the year.

SAB warned that the continued sales ban and the prevention of transporting the inventory to the warehouses would come at a huge cost for both the company and the government.

The brewer said that it currently has 132 million litres of beer - roughly the equivalent of 400 million bottles of beer - sitting in its tanks.

“If SAB is not able to resume transporting inventory, it will be forced to discard this inventory at a loss of an estimated R150 million.

"The economic effects for the government would be even more severe. The immediate loss to the government in excise tax would be R500m as the government does not collect excise for unpacked beer,” SAB said.

The warning comes as international beer consumption plunged on the Covid-19 lockdown ban of alcohol sales.

SAB parent company, Anheuser-Busch InBev (AB InBev) on May 7 said that its volumes tumbled 9.3percent decline, slashing its revenue 5.8percent and earnings before interest, tax, depreciation and amortisation falling 13.7 percent to $3.95 billion (R73.5 bln) in the first quarter.

AB InBev said total sales volumes declined 9.3 percent with a 32 percent plunge in April.

The group reported a net loss of $2.25 bln in its first quarter from profit of $3.57 bln previously.

“We have exercised prudent financial discipline with several proactive measures, including optimising our cost base, revising our final 2019 dividend proposal and maintaining a strong liquidity position,” AB InBev said.

The company has already slashed more than 30percent of its market capitalisation this year.

SAB said it expected the reduction in capacity to lead to job losses if it is forced to discard its current inventory as it would be forced to operate at about 50percent capacity for four months. It said 2 000 jobs - half of its workforce - could be lost internally and a further 75000 in its domestic supply chain.

Jordan Weir, a trader at Citadel, said Covid-19 would lead to further losses in the alcohol beverages industry into the next year as many people would remain reluctant to return to public spaces such as restaurants and pubs.

“The company will probably also see worse second quarter numbers as the first quarter only accounted for the impact of some geographic lockdowns, while more countries only went into official lockdown towards the end of March,” Weir said.

He added that while India had just lifted the ban, it slapped an additional 70 percent “corona-tax” on to alcoholic beverages.

“It is not certain whether SA citizens will also see some form of alcoholic tax hikes, but it is something to keep in mind as the brewer will look to make up any losses where possible.”

06 May, 2020