EABL narrowly misses complete performance turnaround with full year profit slipping by 1%

KENYA – The East African Breweries Limited (EABL) has reported 15% growth in revenue to Ksh 86 billion (US$791m), driven by smart investment behind brands, channel focus and innovations, which led to overall volume sales growing by 13%.

The stellar top line performance was delivered on the back of a tough operating environment characterised by increased volatility due to COVID-19 imposed curfews and restrictions, depressed consumer spending and global supply chain disruptions.

However, the company adapted to the pandemic, finding new routes to market including distributing products to consumers’ homes via its Party Central platform and other eCommerce channels.

Also, the subsidiary of Diageo, introduced convenient pack formats, extended its beer can portfolio, and unveiled one way glass format for off trade channel to address increased at home consumption.

“We responded to the new realities by continuing to invest behind the brands, expanding capacity and sustaining productivity initiatives to manage our cost base to ensure we emerge stronger,” said EABL Group Managing Director Jane Karuku.

The rise in off-trade consumption led to EABL registering a faster growth in the spirit category by 23% with premium wine following closing at 21% and beer at 12%.

Sales in the Kenyan market rose 11 percent, particularly in spirits which was 24% for mainstream category and 24% for total spirits.

EABL’s full year earnings fell by a narrow margin to US$64.09m from US$64m

Meanwhile, demand for beer was hurt by restrictions including closure of bars and night-time curfew which reduced drinking hours at social joints.

Bottled beer sales grew by 5% with its Senator category driving new sales of 3%.

The regional alcohol maker saw its biggest rebound in sales in Uganda where revenues were 33% higher driven primarily by beer and spirits sales. Tanzania sales were up by 15 per cent.

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The higher turnover was accompanied by cost escalation across production, distribution and other areas, making EABL narrowly miss a complete performance turnaround with its full year profit to June slipping by a single percentage point.

For instance, EABL cost of sales in the year rose by a higher 15.8 per cent to Ksh.48.5 billion (US$446.5m) from Ksh.41.9 billion (US$385.8m) previously.

Undisclosed costs increased the most by Ksh2.6 billion (US$23.9m) to Ksh9.8 billion (US$90m) while administrative expenses expanded by Ksh755 million (US$6.95m) to Ksh9.3 billion (US$85.6m).

Selling and distribution costs also increased by Ksh771 million (US$7.1m) to Ksh7.3 billion (US$67.2m).

This led to the alcohol beverage manufacturer’s earnings falling by a narrow margin to Ksh.6.96 billion (US$64.09m) from Ksh.7.02 billion (US$64m) at the same stage last year.

“We are cognisant of the fact that the uncertainty posed by the pandemic will continue. However, we are confident that our strategy is working and will continue to focus on business recovery to grow top line and recover margin,” Karuku said.

During the year, EABL invested Ksh.7.8 billion (US$71.82m) to support its new growth channels.

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