HOPEFUL

EABL optimistic on 2022 after 131% jump in half-year profit

Group’s net earnings jumped to Sh8.7 billion.

In Summary

•This was primarily driven by the higher net sales, margin expansion, robust cost management and the re-opening of bars in Kenya in the second quarter.

•On Thursday, it reported the best interim profit after tax in the last five years.

Production at the East African Breweries Limited plant in Nairobi/FILE
Production at the East African Breweries Limited plant in Nairobi/FILE

East African Breweries (EABL) is optimistic of continued growth in the second half of the current financial year after a strong performance in the six months ended December 31.

This, even as it remains concerned over the uncertain trading environment with the lingering socio-economic impact of the Covid-19 pandemic, excise tax volatility, and shifting political changes.

“We are cautiously optimistic that improved consumer incomes, on-trade recovery, and off-trade resilience will continue apace, fueling our net sales growth momentum across East Africa,” managing director Jane Karuku said.

On Friday, Karuku said the firm would continue investing in both off-trade and on-trade, with a keen eye on new market trends to drive sales.

“During this pandemic, our strategic clarity enabled us to maintain focus on brand-building, active portfolio management, consumer-led innovation, and digital transformation, all executed through extra-ordinary efforts and resilience of our people,” she said.

The easing of Covid-19 restrictions has contributed to a more favourable trading environment, the firm says, as consumers return to pubs and bars.

“The broader economic rebound across East Africa continues to strengthen consumer demand across all our product categories, supporting our overall performance,” the listed firm said.

EABL has reported Sh54.9 billion in net sales for the half-year ended December 2021 31, representing a 23 per cent growth compared to the same period last year.

Volumes grew strongly at 23 per cent , driven by investment behind brands and innovation in the route to market in response to consumer behaviour shifts.

Additionally, the continued investment in the capacity of Sh6.2 billion enabled EABL to rapidly respond to the increased consumer demand.

Consequently, the Group’s profit after tax grew 131 per cent to Sh8.7 billion, primarily driven by the higher net sales, margin expansion, robust cost management, and the re-opening of bars in Kenya in the second quarter.

This is the best interim profit after tax in the last five years.

MARKETS PERFORMANCE 

The firm has operations in the three key East African Community markets of Kenya, Uganda and Tanzania.

In Kenya, net sales increased 27 per cent primarily due to accelerated strategic investment behind brands and channels, the firm says, with the re-opening of bars in the second quarter further improving the net sales growth.

In Uganda, net sales grew 18 per cent driven by “the market’s agile response to the shifting consumer trends as well as strategic pricing decisions.”

Uganda’s innovative channel delivery model ensured outstanding last-mile success, guaranteeing growth, management affirmed.

Net sales in the Tanzanian market grew 15 per cent with beer and spirits registering double-digit growth.

The good performance has seen the board recommend an interim dividend of Sh3.75 per share to be paid subject to withholding tax, on or about April 27.

To support future growth, capital expenditure increased by 51 per cent (to Sh6.2 billion), against the same period last year, mainly in relation to capacity expansion in Tanzania and Uganda.

Net debt reduced from Sh40.7 billion at June 30, 2021 to Sh34.7 billion as at December 31.

During the period, the group raised Sh11 billion through the issue of a Medium Term Note in the capital markets.

“The proceeds of the issue were utilised to refinance existing debt and fund capital expenditure,” management explained.

Commenting on EABL’s Environmental, Social and Governance (ESG) agenda, Karuku said: “We continue to focus on Spirit of Progress, our 10-year sustainability programme.”

This is a three-pronged agenda aimed at promoting positive drinking, championing diversity and inclusion and pioneering grain to glass sustainability across our value chain.

EABL’s regional effort to support the hospitality sector through the pandemic has gathered pace, with 60 per cent of the Raise the Bar fund (Sh570 million) already spent.

This fund is enabling physical and digital support to bars welcoming customers back after lockdowns.

EABL has also complemented government efforts across the region in driving national programmes to combat the impact of Covid -19, vaccinating its employees, their families, and consumers.

TAXES 

The group continues to be a major contributor to the revenues of governments in the region.

Taxes in the form of Excise Duty and Corporate Income Taxes in the period amounted to Sh45 billion across the region.

Even so, excise tax remains uncertain in Kenya with the annual escalation remaining a key concern for its biggest market.

In Uganda a 41 per cent reduction of the digital tax stamps value was effected and Tanzania maintained excise on beer but implemented a 20 per cent increase in excise duty on spirits.