Food Industry companies facing tough economic conditions projecting drop in earnings

KENYA – The COVID-19 pandemic lockdown, movement restrictions, temporary ban of some products and services experienced in different parts of the world has resulted to companies face a tough economic situation and harsh operating environments resulting to deeming revenues.

East Africa Breweries Limited (EABL) having operations in Kenya, Uganda and Tanzania has issued a statement warning of a decline in profit after tax of approximately 25% for the financial year ending 30 June 2020 versus prior year.

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“The COVID-19 global pandemic and the subsequent response measures taken across the region have impacted our business negatively,” stated Martin Oduor EABL chairperson.

“The Company has deployed a raft of measures to minimise the impact of the pandemic on its business. EABL’s top priorities are the safety of its people and to remain cost efficient during this period,” he added.

The company posted Ksh11.5 billion (US$107.83m) in profit after tax for the full year ending June 30 2019 up from Ksh7.3 billion (US$68.4m) made in 2018.

In South Africa, Distell, the maker of Amarula, Klipdrift and Hunter’s Dry brands, expects a hefty fall in profits after SA liquor sales evaporated during the Covid-19 lockdown.

The group expects headline earnings per share (HEPS) to fall by between 60% and 80% in its year to end-June, and faces even more uncertainty regarding the easing of lockdown regulations in SA, and write downs of its stock, reports Business Live.

The group reported HEPS of 652.9 cents a year earlier.

There is also the chance of a short-term spike in demand as lockdown regulations ease, Distell said, while its ability to export to countries that have less severe restrictions is also in question.

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SA implemented a lockdown on March 27, but has since moved to a level 4, although liquor and cigarette sales remain prohibited.

On the flip side of the situation, Famous Brands expects its earnings to climb as high as 179percent for the year to end February as a result of the absence of once-off costs, which negatively impacted Africa’s largest branded food services franchisor a year earlier.

According to the South African restaurant franchisor, its basic headline earnings per share (Heps) is expected to increase by 15percent to 40percent, to be between 362c to 442c during the period, up from last year’s Heps of 316c.

In last year’s results, Famous Brands was impacted by once-off costs of R17.2million (US$0.93m) for professional fees and redundancy costs related to the company voluntary arrangement (CVA) completed at Gourmet Burger Kitchen (GBK) restaurants in the UK.

The group also suffered an impairment of R873.9m (US$47.25m) pre-tax relating to GBK recognised at group level as well as an impairment of R25.5m (US$1.3m) recognised in an associate company in which the group has a minority stake.

The group was faced by economic and political uncertainty in its major markets in last year’s results, both locally and in the UK, as the Brexit process continued to unfold.

Last month Famous Brands said that it was reviewing its investment in GBKand had decided not to provide any further financial assistance to the business.

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