EABL full-year profit drops by Sh1b as struggling Kenyans drink less
Business
By
Brian Ngugi
| Jul 30, 2024
The ongoing cost of living crisis in the country is affecting how Kenyans partake in their beloved Kenyan staple that has long been considered immune to recession -beer.
This has emerged as East African Breweries Ltd (EABL) revealed Tuesday that its net profit dropped by Sh1.45 billion in the full year to June due to higher taxes and input costs, and as price-sensitive and broke consumers shunned the frothy drink.
EABL - which is controlled by Britain's Diageo and is known for its flagship Tusker beer - saw its net earnings decline 12 per cent to Sh10.87 billion in the full-year period to June this year from Sh12.32 billion booked in a similar period in 2023.
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The brewer said EABL's Group volume grew just 1 per cent which saw profitability impacted by inflation and higher taxes which afflicted the brewer by reducing consumers' purchasing power even as input costs jumped due to the high costs of ingredients with excise tax escalation impacting the price-sensitive mainstream segment.
"Over the year, we navigated a complex and unpredictable macro environment marked by significant increases in interest rates and currency devaluation," said EABL.
"Additionally, cost inflation coupled with El Nino rains and social unrest disrupted our operations, whilst constrained consumer purchasing power led to spending reprioritisation and down trading. The economic conditions have also led consumers to illicit trade."
Despite the performance and the gloomy outlook, the Nairobi Securities Exchange-listed firm proposed a total dividend of Sh7 per share, higher than the Sh5:50 paid out in the same period last year in a huge relief for shareholders.
"The Board of Directors recommends a final dividend of Sh6.00 per share subject to withholding tax," said EABL.
"This dividend is scheduled for payment on or about 28th October 2024 to shareholders who are duly registered at the close of business on 16th September 2024. If approved, the total dividend for the year will amount to Sh7.00 per share (FY 2023: Sh5.50)."
Kenya's inflation rate has remained stubbornly high just as food, energy and transport prices soared.
The rise in the cost of essential commodities has forced workers to cut back spending on non-essential items such as beer and airtime, ultimately hurting firms such as EABL and Safaricom.
EABL says multiple excise tax increases in Kenya have exacerbated consumer prices and have particularly impacted price-sensitive consumers.
This has forced many households, especially in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from Covid-19 economic hardships and confront the Ukrainian war's global economic fallout.