EABL reports double digit decline in profit triggered by dwindling sales in second half year period

KENYA – The East African Breweries Limited (EABL) has announced a 39% decline in net profit to Sh7 billion (US$64.9m) for the year ending June 2020, due to the plunge in net sales in the second half of the year (January – June) attributed to the effects of the COVID-19 pandemic.

The latest performance is in contrast to the Sh11.5 billion (US$106.7m) net profit posted in the previous financial year and is the lowest since 2014 when it posted net profit of Sh6.85 billion (US$63.5m).

The company has seen a 9% decline in net sales to ksh. 74.9 billion (US$695.25m) despite a 10% first half growth, which has been wiped out by a corresponding 29% decline in the second half period.

The second half decline was due to the impact of the Covid-19 pandemic which saw containment measures such as closure of bars and restricted movements imposed by the government across East Africa during the pandemic.

“There was a significant decline in sales following the closure of outlets and restrictions on movement primarily in Kenya and Uganda,” said the firm.

According to reports by The Star, mainstream and value spirits remained resilient and registered 2% growth versus prior year as the category benefitted from a shift of outlet consumption occasions to at-home consumption, the firm said in a statement.

In Uganda the brewery recorded a 5% decline in sales compared to last financial year as first half growth of 10% was offset by the impact of a total lockdown from March to June, resulting in a 21% decline in sales in the second half.

EABL has however witnessed a saving grace in Tanzania where net sales have grown by 14%. First-half growth of 19%, however, slowed down to 10% in the second half.

EABL Group MD and CEO, Andrew Cowan, said, “During this unwelcome pandemic, our top priority has been to safeguard the health and well-being of our people and support our communities while taking necessary action to protect our business.

“Across the markets, we have tracked changes in consumer behaviour and repurposed our execution plans in trade to continue serving our consumers where safe and possible to do so.”

Cowan said EABL focussed on managing working capital tightly in the last quarter, reducing discretionary expenditure and reallocating resources such as advertising and promotion spend to new and emerging channels in order to serve our consumers safely.

The company is now focused on re-emerging strongly from the current crises and has since set aside Ksh.500 million to support the recovery of on-trade outlets in Nairobi, Kampala and Dar es Salam as part of its mother company-Diageo Ksh.10.7 billion (US$100 million) ‘Raising the Bar’ global fund.

“Going forward, our market teams have put in place robust plans to help us emerge stronger from this crisis once the measures are eased across our markets. We will continue to execute with discipline and invest prudently to ensure we are strongly positioned for a recovery in consumer demand,” added Cowan.

Pushed by the decline in sales, EABL has adopted a cash conservation stance and its board has not recommended a final dividend to shareholders leaving April’s Ksh.3 per share interim dividend as the final pay-out.

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