KENYA – A KES 3.3 billion (US$22.89 million) drop in the annual profits of East African Breweries (EABL) has come back to haunt the region’s largest brewer, adversely impacting its performance at the Nairobi Stock Exchange.
According to Business Daily, EABL’s share price fell 3.8 percent to a new 52-week low of KES129.75 on the second Wednesday of August from a high of Sh135 on the previous day when 10,400 shares were traded.
The recent fall in the share price –from a high of Sh164.5 on July 27, which was the eve of the results announcement— has been linked to the company’s performance in the year ended June.
EABL’s board of directors recommended a final dividend of Sh1.75 per share, which when added to the interim payout of Sh3.75 per share brought the total for the financial period to Sh5.5 per share.
Comparatively, the alcohol manufacturer’s payout to shareholders in the year to June 2022 was an interim of Sh3.75 per share and a final one of Sh7.25 per share for a total of Sh11 per ordinary share.
In the month running up to EABL’s results announcement, its share price had appreciated from Sh152 to Sh164.50, indicating that investors were anticipating a relatively unchanged dividend payout.
The Nairobi Securities Exchange-listed firm reported a profit drop from KES15.6 billion (US$108.22 million) a year earlier to KES 12.3 billion (US$85.33 million) as higher costs heavily impacted margins.
Gross sales grew marginally to KES 197.6 billion (US$1.37 billion) from KES 193.9 billion (US$1.35 billion) previously but could not offset the higher costs which were due to a cocktail of increased indirect taxes, cost of sales, and net finance costs.
Net finance costs, for instance, grew to KES5.5 billion (US$38.15 million) from KES 4.2 billion (US$29.14 million) previously while the cost of sales touched KES 62.2 billion (US$431.49 million) from Sh56.6 billion (US$392.65 million).
Meanwhile, British multinational Diageo has disclosed that it spent £4 million (KES733 million) on transaction fees when buying an additional 14.97 percent stake in EABL earlier this year.
Diageo bought 118.394 million shares at a unit price of Sh192 in the oversubscribed offer, valuing the deal at KES 22.7 billion (US$157.47 million) and raising its stake in the brewer to 65 percent from 50.03 percent.
The London-based company executed the acquisition through its wholly-owned subsidiary Diageo Kenya, through which it holds its stake in EABL.
Offer documents list Stanbic Bank and its investment banking subsidiary SBG Securities as the financial advisers to Diageo Kenya in the deal. Stanbic was also the paying bank, and SBG the sponsoring broker and lead acceptance agent.
Law firm Coulson Harney LLP (Bowmans Kenya) was the legal adviser, while Image Registrars was the appointed data processing agent.