Bar closures hurt brewer’s earnings

The coronavirus pandemic wiped out nearly half of East African Breweries’ net profits in the first six months of the financial year after bar and restaurant closures hurt its beer sales.

The brewer’s profit after tax fell by 47 per cent to Sh3.79 billion for the half-year ending December 31, 2020 from Sh7.2 billion in the same period of 2019, primarily driven by a one-off tax provision.

The maker of Tusker and Pilsner saw its net revenue drop by three per cent to Sh44.5 billion from Sh45.9 billion, hurt by the eight per cent drop in beer sales.

This coincided with the period when the government had prohibited bar and night clubs from operating. The ban was lifted in August but operating hours were reduced by the dusk-to-dawn curfew.

However, the company’s earnings were boosted by spirits, whose net sales grew by 10 per cent.

The brewer said the decline in beer sales was primarily driven by Senator Keg due to Covid-19 related countrywide bar closures in Kenya.

In the three markets where EABL operates, Kenya was the worst hit, with sales declining by 10 per cent compared to the same period last year due to bar and restaurant closures.

The company said although bars and restaurants were re-opened in the second quarter, operations were impacted by the protocols implemented for safety of consumers as well as the restrictions of opening hours and the curfew.

In Uganda, net sales grew by 13 per cent, driven by wholesale, while in Tanzania net sales grew by 17 per cent due to minimal impact from Covid-related restrictions.

The company also attributed the drop in profitability to excise duty increases, general price inflation and additional costs related to digital tax stamp implementation in Uganda.

Jane Karuku, the EABL Group Managing Director said: “We remain cautiously optimistic about the second half of the year, not least because the pandemic and potential shifts in our trading environment present risks on the horizon.”

Last month, EABL started the rollout of its Sh558 million ($5 million) East African fund in Kenya to help pubs and bars recover from the Covid-19 disruptions.

The support constitutes hygiene kits, permanent sanitiser dispenser units, as well as protection screens for bars to comply with reopening protocols.

“We know this has been the most difficult time for the hospitality industry. We have no doubt that the ‘Raising the Bar’ programme will provide the much-needed shot in the arm for these outlets at a time when they most need our support,” Ms Karuku said.

The group did not recommend an interim dividend “due to uncertainty in the external environment and the need to conserve cash to enable the business to continue on a recovery trajectory”.