COVID-19 disruptions, tax provisions nearly halved EABL’s profit in six months ended December 2020

KENYA – The East African Breweries Limited (EABL) has reported a 47.3 per cent dip in profit for the half year ended December 2020 to Ksh.3.8 billion (US$34.5m) from Ksh.7.2 billion (US$65.3m) registered in the same period in 2019.

The alcohol manufacturer attributes the sharp decline to one-off tax provision, excise duty increases, general price inflation and additional costs related to digital tax stamp implementation in Uganda which impacted profitability.

Also, trade restrictions brought by the COVID-19 pandemic continued to hamper the company’s performance especially in Kenya.

During the period under review, the brewer recorded a net sales decline of 3 percent to Ksh44.5 billion (US$404m) compared to the corresponding period in 2019.

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However, the company says the performance is better than the previous half year (January to June 2020) that was significantly impacted by COVID-19 restrictions as bars remained closed and restaurants were prohibited from selling alcohol reporting a 29% decline in sales.

EABL’s spirits net sales grew by 10 percent, partially offset by beer sales which declined by 8 percent against the same period last year.

The companies’ administrative expenses meanwhile reduced by six per cent to Ksh.4.3 billion (US$39m) on discretionary spending.

The conservative stance saw cash generated from operations top Ksh.17.9 billion (US$162.5m) from Ksh.15.2 billion (US$138m) even as the Group’s current liabilities increased to Ksh.41.4 billion (US$375.9m) from Ksh.36.9 billion (US$335m) a year before.

Uganda and Tanzania showcase stellar performance

At country level, the Kenyan market represented the slack in EABL’s business with sales dipping 10 per cent due to Covid-19 containment measures that saw continued closure of bars as well as a ban on the sale of alcohol in restaurants in the first quarter.

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

However, Uganda delivered net sales growth of 13 per cent compared to the same period last year. Leveraging wholesale channels, enlisting new selling points at mini-shops, home deliveries and e-commerce partnerships, drove this.

Minimum Covid-19 disruption in Tanzania saw the market continue to deliver double-digit growth.

Net sales grew 17 per cent compared to the same period last year driven by broad-based growth across all categories. Beer net sales grew 17 per cent with strong growth from the ongoing success of the Serengeti trademark.

Future outlook

EABL has relied on e-commerce to grow sales under the continued volatile operating environment which still features restrictions to the operation of bars and other entertainment joints.

The firm is however optimistic of a rebound in the second half even as it manages expectations on the level of growth.

“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.

“We will continue to stay close to our consumers, innovate to address the consumer patterns, tightly manage our costs, and with agility reallocate resources to address the dynamic operating environment,” said EABL Group Managing Director Jane Karuku.

Last month, the company launched the US$3 million recovery fund in Kenya as part of the overall US$5 million Raising the Bar kitty slated for the East Africa region by Diageo to help pubs and bars recover from the Covid-19 disruptions and prop up sales.

“We are committed to the safety and comfort of our customers and supporting the trade at this critical time when they are in need. 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,” Karuku said.

Bar owners have until 12th February 2021 to access the fund which is aimed at helping them implement health safety measures announced by the Health ministry.

The fund will subsequently be launched in Tanzania and Uganda in coming months according to the brewer.

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