- EABL net sales increased by 16 per cent to $408.39 million (KSh66.5 billion) in six months ending December 2023.
- The Group’s bottom line was negatively impacted by high input costs, inflation, Kenyan Shilling’s devaluation and escalating interest rates.
- Directors recommended an interim dividend of $0.01 (KSh1) per share, a reduction from the $0.02 (KSh3.75) paid last year.
A combination of macroeconomic factors, inflation and rising finance costs have seen EABL profits suffer a 22 per cent decline to $41.5 million (KSh6.8 billion) in half-year ended December 2023 compared to similar period previously.
East African Breweries Ltd says the devaluation of Kenyan Shilling resulted in a forex loss of $14.1 million (KSh2.3 billion), an increase of $12.8 million (Sh2.1 billion) versus the same period last year.
Overall, the Group Managing Director and CEO Jane Karuku attributed the decline in EABL profits to increased input costs, currency devaluation, and rising interest rates.
When questioned about the business’s outlook and the repercussions of foreign exchange losses, Group Chief Financial Officer Risper Ohaga said, “Our growth is more rapid in markets beyond Kenya, which aids in offsetting the risks associated with the depreciation of the Kenyan Shilling. Additionally, we are actively promoting the procurement of local resources to further alleviate these risks.”
Ms Karuku highlighted the company’s focus on brand building, commercial execution, and innovation as driving factors behind revenue growth.
Looking ahead, Ms. Karuku said: “Our priorities for the second half are clear: we will remain consumer-centric and execute brilliantly to keep up with the dynamism in the market, drive cost efficiencies to grow margins and invest smartly in our brands and business.
“Further, we will continue to deliver against our Environmental Social and Governance commitments whilst driving high performance culture and engagement of our people.”
Read also: EABL half-year profit remains flat as costs rise
Impact of New Products on EABL Profits
Additionally, the commissioning of a microbrewery enabled the launch of new beer and cider products, while efforts in ESG initiatives yielded positive results in water efficiency and carbon footprint reduction.
In the half-year period ending on December 31, 2023, EABL Group reported net sells of $408.39 million (KSh66.5 billion), marking a 16 per cent increase from the previous year.
This growth was supported by a two per cent volume rise, driven by strong consumer demand across markets and effective commercial strategies.
Net sales grew in all three key markets, with Kenya up by 10 per cent, Uganda by 31 per cent, and Tanzania by 9 per cent. The beer and spirits categories experienced notable growth rates of 18 per cent and 13 per cent, respectively.
EABL Group Managing Director and CEO Jane Karuku says the brewer’s premium spirits segment proved resilient, registering double-digit growth in the financial year ended June 30. At the same time, EABL’s selling and distribution costs increased by 17 per cent, with advertising and promotions spending rising to $37.5 million (Ksh6.1 billion). The microbrewery in Kenya began production of innovative brands during the half-year period.
Looking forward, Ms. Karuku outlined priorities for the second half, emphasizing consumer-centric strategies, cost-efficiency measures, brand investment, and commitment to ESG goals.
The EABL Board recommended an interim dividend of $0.1 (KSh1) per share, a reduction from the $0.02 (KSh3.75) paid last year.
Sales for EABL experienced growth across all three key markets, with a 10 per cent increase in Kenya, a 31 per cent surge in Uganda, and a 9 per cent rise in Tanzania. (Source: EABL)
Tax Relief Offered Little Cushion
EABL’s dip in profits comes despite alcohol having been spared from tax increases for the first time in five years after the Finance Act 2024 left out the product from excise duty adjustments, handing manufacturers and consumers a major relief.
The two products, alongside betting and luxury items, had become an easy target for excise tax increases under President Uhuru Kenyatta’s regime, which unleashed back-to-back tax increases on the ‘sin industry’ as it sought to raise additional revenues.
Alcohol and cigarettes were for decades seen as price inelastic, meaning their consumption would not be hurt by price movements in either direction, making the products the easy targets for tax raids.
