Solibra: Beverages

The Company

 After 60 years in operation, the Société de Limonaderies et Brasseries d'Afrique ( Solibra) has developed production expertise and unparalleled consumer awareness in the beverage market in Côte d'Ivoire. The company has invested nearly CFA47bn (€70.5m) since 2012 to modernise its four sites – one in Treichville, one in Bouaflé and two in Yopougon. Like other African branches of France’s Castel Group, quality management is at the heart of Solibra’s competitiveness strategy. With 16 brands and 92 products, Solibra supplies nearly 50,000 outlets and ranks among the largest employers in the country, with more than 1500 employees – 1050 of which are permanent – and approximately 250,000 people indirect employed in distribution, bars and restaurants, among others.

Solibra is ranked first in the manufacturing and marketing of beer, sodas, mineral waters and spring water in Côte d'Ivoire, despite the presence of several competitors in the market. In the beer segment, Solibra’s market share stands at around 80% due to the growing competition from Les Brasseries Ivoiriennes, which has a market share of around 10%, as well as local traders focused on imported beers, including Heineken, Codis and Bavaria. On the soft drink side, Solibra’s has a 90% market share. The competitors Soft Drink CI (PepsiCo) and Nouvelle Brasserie de Côte d'Ivoire (Monarch Beverage) hold around 10%.

Outlook

Sales grew by just over 7% year-on-year (y-o-y) in the first half of 2014 to reach CFA81.36bn (€122m). This growth was mainly due to higher sales volumes in the provinces compared to the same period in 2013. Nonetheless, Solibra's EBITDA as of the end of June 2014 was CFA9.20bn (€13.8m), down 26.56% y-o-y from CFA12.52bn (€18.78m).

This drop in performance was largely due to the increase in the rate of excise duty on beer, from 13% to 15%, which went into effect on January 1, 2014. Furthermore, the tax base, which changed from the ex-factory price to the selling price, also played a role. As a result, net income dropped from CFA8.97bn (€13.46m) in the first half of 2013 to CFA6.15bn (€9.23m) in the first half of 2014 – equivalent to a 31.47% drop. Given this, the full year net income for 2014 is expected to be around CFA13bn (€19.5m).

With a price-to-earnings ratio of 18.14x Solibra is currently trading below the sector average of 25.47x. This demonstrates good growth potential in line with the wider recovery of the Ivorian economy in the medium term. The company also boasts a generous dividend policy, with an average historical payout ratio of 83% over the last 10 years.

However, the decision of the government to increase the excise tax and the growing competition in the market will impede the company from producing the same net income as in past years – unless management makes some strategic decisions in the coming years. To give Solibra greater liquidity, management conducted a share split on a two-for-one basis on December 30, 2014. This operation will halve the nominal share value from CFA5000 (€7.5) to CFA2500 (€3.75), and double the number of shares to 1,646,084.

Development Strategy

Through its four existing production sites, Solibra produces more than 300m litres of beer, soda, mineral and spring water per year. Solibra’s management decided to remodel its entire production line, which saw investment expenditure climb to CFA28.73bn (€43.1m) in 2012 and CFA27.89bn (€41.8m) in 2013, compared to an average of around CFA10bn (€15m) in past years. In 2014 Solibra made a CFA25bn (€37.5m) investment in its Treichville and Yopougon factories. The company’s management plans to continue this investment trend, with the objective of acquiring the most technologically sophisticated equipment.

Castel Group and all its subsidiaries in Africa are committed to producing and marketing strong brands and affordable, quality products for its consumers. To solidify this commitment, the company is seeking to obtain the ISO 22000 certification for food safety in 2015.