SHAKEN BUT NOT STIRRED: EABL revenues grow to KShs66.5 bn, but rising costs dampen half-year profits

Despite a  strong 16% growth in net sales in the first six months of EABL’s FY2024 (July -December 2023) compared to the same period in the prior year, East African Breweries PLC (EABL), the Diageo-owned alcoholic drinks giant, has reported a 22% decline in half-year after-tax profit.

This, it attributed to macro-economic-driven cost inflation and rising finance costs.

In the just released results, the company reported that its net sales went up by 16%, to Kshs 66.5 billion for the half year ended December 31, 2023, from KShs57.3 billion in a similar period in F23.

“EABL’s half-year profit after tax declined 22 % to Kshs 6.8 billion compared to same period last year, primarily driven by macro-economic-driven cost inflation and rising finance costs. Further, the devaluation of local currency has resulted to (FX) loss of Kshs 2.3 billion, an increase of Kshs 2.1 billion versus same period last year,” the company said in a statement.

The company also reported a major increase in the excise duty of key raw materials⏤ 10% and 5% for glass and sugar respectively. Inflation was an average of 16% inflation made worse by a 39% rise in the cost of fuel and 16% in the cost of electricity. Pressed by inflation and other rising costs of living, there was lower discretionary spend which caused the alcohol category share of wallet to drop by 2% compared to pre-Covid.

EABL Group’s however volumes increased by 2 %, lifted by what the company said was “resilient consumer demand” and “a strong and expanding portfolio with brilliant commercial execution”.

The Group reported net sales growth across the three markets: Kenya at 10 %, Uganda at 31 at % and Tanzania at 9 %. Additionally, beer and spirits categories grew at 18 % and 13 % respectively.

Kenya forms 63% of the EABL portfolio, followed by Uganda (22%) and Tanzania (15%).

Commenting about the results, EABL Group Managing Director and CEO, Jane Karuku, said: “We have achieved a resilient set of results in the half-year period. Our great brand building, brilliant commercial execution, as well as consumer insight-led innovation, has allowed us to continue our revenue growth momentum. However, our bottom line has been impacted by increased costs of inputs, currency devaluation and rising interest rates”.

The company said it continues to invest behind its brands with advertising and promotions spend rising 16.5 % to Kshs 6.1 billion. It also reported that its Kshs 1.2 billion microbrewery in Kenya had started producing the first innovation brands during the half.

Looking ahead, Ms. Karuku said: “Our priorities for the second half are clear: we will remain consumer­ centric and execute brilliantly to keep up with the dynamism in the market, drive cost efficiencies to grow margins and invest smartly in our brands and business. Further, we will continue to deliver against our ESG commitments, whilst driving high performance culture and engagement of our people.”

The EABL Board has recommended an interim dividend of Kshs 1 per share to be paid on or about April 26, 2024.