EABL full-year profit drops by Sh3b as struggling Kenyans drink less

EABL CEO Jane Kabuku speaks when the brewer revealed Thursday its net profit dropped by Sh3.2 billion in the full year to June. [Wilberforce Okwiri, Standard]

The ongoing cost of living crisis in the country is affecting the way Kenyans partake in their beloved Kenyan staple that has long been considered to be immune to recession - beer.

This has emerged as East African Breweries Ltd (EABL) revealed Thursday its net profit dropped by Sh3.2 billion in the full year to June on the back of 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 20.8 per cent to Sh12.3 billion in the full-year period to June this year from Sh15.5 billion booked in a similar period in 2022.

The brewer said EABL’s Group volumes were down 7 per cent year-on-year, as inflation and higher taxes afflicted the brewer by reducing consumers' purchasing power even as input costs jumped due to the high costs of ingredients.

Net sales in Kenya declined 4 per cent with excise tax escalation impacting the price-sensitive mainstream segment.

“The trading environment in Kenya also impacted performance, particularly trade distractions leading to county-led bar closures,” said EABL.

Following the lower performance and the gloomy outlook, the Nairobi Securities Exchange-listed firm slashed its dividend by more than half to Sh5.50 per share, lower than the Sh11:00 paid out in the same period last year in a financial blow for its shareholders.

Kenya’s inflation rate has remained stubbornly high just as food, energy and transport prices soared, remaining above the Central Bank of Kenya’s target range of between 2.5 and 7.5 per cent.

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.

“The Board of Directors has recommended a final dividend of Sh1.75 per share (2022: Sh7.25) subject to withholding tax, to be paid on or about 27th October 2023 to shareholders registered at the close of business on 15th September 2023,” said EABL.

“This will bring the total dividend for the year to Sh5.50 per share (2022: Sh11.00).”