KENYA – Beer maker East African Breweries Limited (EABL) has halved its Sh20.2 billion ($200 million) loan owed to parent company Diageo.
The beer maker used cash from the sale of its glass subsidiary to repay part of the loan in the financial year ended June 2016.
The EABL, which announced its full-year results on Friday, also said it had wired Sh8 billion to Diageo in addition to the Sh2.8 billion paid out in the previous financial year.
The brewer in September sold its glass making subsidiary Central Glass Industries (CGI) to South Africa’s Consol Glass for Sh4.49 billion, booking a gain of Sh2.3 billion.
“A major achievement this year is the reduction in our borrowings as a result of this strong cash performance and sale of non-core assets including CGI,” said Gyuri Geiszl, EABL’ finance director.
“We managed to reduce our borrowings by Sh7 billion. As a result, we repaid Sh8 billion of the long term loan from our parent company.”
The beer maker took a loan from Diageo in 2011 to finance the buyback of a 20 per cent stake in Kenya Breweries Limited, which it had earlier sold to its partner-turned-rival SABMiller.
The EABL pays an interest rate of over 12 per cent on the loan, hence the urgency to clear it.
In disclosures made in a shareholders’ circular, EABL said it will use the cash from CGI’s sale to partly repay the loan to its parent company but also later announced a special dividend of Sh4.5 per share from the same transaction.
The brewer Friday reported that its after-tax profits for the year was up seven per cent to 10.3 billion, even as sales of its mainstream beers and premium spirits dipped.
In Kenya, Tusker sales dropped due to excise tax increase of 43 per cent in December while in South Sudan the renewed political instability has ground business to a near standstill.
Sales of premium spirits like Johnnie Walker and Smirnoff dipped eight per cent after it stopped supplying a customer who was irregular shipping the product outside East Africa border.