- East African Breweries PLC (EABL) has reported a profit of KSh 8.7 billion for the half year ended on December 31, 2022, at the back of the rising cost of operations, including an increase in taxes
- The company reported KSh 57.3 billion in net sales during the period, representing a 4 per cent growth compared to the same period in 2021
- The EABL Board has recommended an interim dividend of KSh 3.75 per share, similar to 2021’s period
East African Breweries PLC (EABL) has reported a profit of KSh 8.7 billion for the half year ended on December 31, 2022, on the back of the rising cost of operations, including an increase in taxes.
During the period under review, EABL reported KSh 57.3 billion in net sales during the period, representing a 4 per cent growth compared to the same period in 2021.
The group’s volumes declined by 4 per cent year-on-year as price increases impacted consumer purchasing patterns, mainly in mainstream and value segments.
Commenting on the performance, EABL Group Managing Director & CEO, Jane Karuku said that the brewery faced an exceptionally challenging time related to macroeconomic volatility and drought situation across East Africa, global inflation, and geo-political disruptions related to the Russia/Ukraine war.
“This was further compounded by excise-related price increases in Kenya, effected in July and October, which significantly affected consumption of our brands,” Karuku said.
Impact of increased taxation
In July 2022, Kenya’s excise tax for beer and spirits came into effect following the 2022/23 Budget, increasing by 10 per cent and 20 per cent, respectively. In October 2022, beer and spirits consumers were hit by a further 6.3 per cent excise tax increase in the form of an annual inflationary adjustment.
These increases came from an annual upward excise adjustment in 2021, leading to a compounded annual excise tax increase of 23 per cent for beer and 34 per cent for spirits. Consequently, beer volumes were down 13 per cent in Kenya, with performance further undermined by a re-emergence of illicit alcohol during the period under review.
As a result, EABL’s net sales growth regressed by 1 per cent in Kenya, its largest market, while Uganda and Tanzania grew by 19 per cent and 11 per cent, respectively.
EABL dividend
The Group’s slower top-line growth resulted in KSh 8.7 billion in profit, which was flat compared to the same period in 2021.
The EABL Board has recommended an interim dividend of KSh 3.75 per share, similar to 2021’s period.
“We will continue executing our strategy to navigate the prevailing macroeconomic volatility, leveraging our portfolio of extraordinary brands, smart investment, fuelled by our culture of everyday efficiency. We are also staying close to our consumers, using our commercial capabilities and digital tools to understand trends and execute with precision rapidly.”
During the period under review, the business continued to invest in brands, digital capabilities and consumer experiences. EABL also invested KSh 5.5 billion in capital expenditure to extend production capacity and Environmental, Social and Governance (ESG) initiatives.
The ESG investment has led to 99 per cent renewable energy use in half of EABL’s six sites across East Africa, a significant progress on the company’s environmental agenda to accelerate its low-carbon journey.
Karuku added: “As we turn a new page into EABL’s next 100 years, I am proud of the execution of our ESG strategy focussing on building a sustainable supply chain, protecting the environment and the natural resources we all rely on. We are forging ahead with plans to support skills development, inclusion and diversity and promote responsible drinking.”
EABL awarded
In a separate story, the Bond and Loans Awards recently ranked EABL’s KSh 11 billion ($96.8 million) Medium-Term Note among the top corporate deals done in Africa in 2021.
The Awards ceremony usually recognises the most innovative and ground-breaking deals from Sovereign, Corporate, and Financial Institution issuers and borrowers.
It named the bond the Local Currency Corporate Bond Deal of the Year.
EABL Group CFO Risper Genga-Ohaga said issuing the bond was the right decision.
“When we issued this bond, we had confidence in the operating environment as we had studied the economy during this pandemic era. It was the right time to proceed as the market was ready to continue investing in different businesses to improve our economies, safely and surely.”
The bond was issued in October 2021, and saw investors bid KSh 37.9 billion ($333 million) in the issuing round, representing an oversubscription of 275%, a record for EABL.
EABL offered the five-year, fixed-rate instrument at an interest rate of 12.25 per cent, payable semi-annually.
