Listed brewer East African Breweries Plc (EABL) recorded an 11.8 percent drop in profit to KSh 10.9 billion for the year ended June 2024, from KSh 12.3 billion a year prior.
- The brewer attributes the decline to foreign exchange losses and the sharp increase in net finance costs, as well as disruptions from cost inflation, El Nino rains, and social unrest.
- Revenues saw a 13.2 percent uptick to KSh 124.1 billion, while Operating costs increased by 18 percent with operating profit surging 10% to KSh 28.8 billion.
- According to the brewer, tougher economic times have led consumers to illicit trade pointing to higher costs that resulted in constrained purchasing power, reprioritization and downtrading.
“The past year has been marked by significant macroeconomic volatility across East Africa. Inflationary pressures, regulatory changes, rising interest rates and fluctuating currency posed substantial hurdles for consumer spending and business operations,” Dr. Martin Oduor-Otieno, the Group’s Chairman said in the EABL’s earnings report.
The decline in net profits is due to an increase in costs of operations (18.4%) against a slower growth in gross profits (13.5%), largely driven by an increase in cost of sales. EABL’s net finance costs grew from Kshs. 5.485bn in 2023 to Kshs. 8, 175 in the year ended June 2024.
Among the brewer’s biggest finance costs is taxes, primarily the need to remit excise duty within 24 hours, which was meant to be corrected in the now rejected Finance Bill 2024. The tax condition has raised debt costs for enterprises which have to borrow, amidst a high interests regime, to remit taxes before they get payment for their products. In January, EABL’s CFO called the situation “very problematic” and “…a zero sum game” from both a compliance and cash flow perspective.
EABL’s cash and cash equivalents increased by KSh 1.8 billion to KSh 10.8 billion, driven by revenue growth and improved working capital management. It also reduced its total debt by KSh 11 billion, which significantly reduced the impact of rising interest rates. The brewer, which manages the company on behalf of Diageo Kenya, also operates in Uganda and Tanzania.
“We have delivered a solid double-digit topline and operating profit growth in a challenging environment, highlighting the strength of our core business and our ability to capture market opportunities effectively,” Jane Karuku, the Group’s CEO said.
In November 2023, EABL launched a new microbrewery in Ruaraka seeking to serve as an innovation center for the viable craft beer,tapping into the next generation of consumers.
