Diageo to earn Sh1.7bn in EABL special payout

An EABL plant: It has declared a Sh4.50 per share special payout. PHOTO | FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• EABL has announced a special payout of Sh4.50 per share that will see Diageo, which owns 50.03 per cent of the brewer (395.6 million of the firm’s issued shares) get a tidy payout.
• The regional brewer sold off Central Glass Industries (CGI) to South Africa’s Consol Glass in September for Sh4.5 billion.

Multinational brewer Diageo is set to walk away with approximately Sh1.78 billion from the special dividends that its subsidiary East African Breweries Limited (EABL) has declared from the sale of its glass-making business.

The regional brewer has announced a special payout of Sh4.50 per share that will see Diageo, which owns 50.03 per cent of the brewer (395.6 million of the firm’s issued shares) get a tidy payout.

EABL sold off Central Glass Industries (CGI) to South Africa’s Consol Glass in September for Sh4.5 billion.

The beer maker had initially told its shareholders that the money would go towards reducing existing debt and investing in its core business.

About Sh900 million of the amount is now expected to be used to settle a debt it owes its parent company.

“To reward the shareholders, the Board considers it appropriate to distribute this special dividend in recognition of additional income EABL received from the sale of CGI,” the brewer said in a statement.

“The special dividend is payable in addition to the interim dividend that was declared for the half year to December and is in addition to any final dividend that the board may declare following the announcement of full-year results.”

EABL’s board in January recommended an interim dividend of two shillings per share (50 cents more than in 2014), and the unexpected payout will make it good year for the brewing firm’s owners.

READ: EABL posts 67pc growth in after tax profit to Sh7.7bn

The NSE-listed firm transferred its 100 per cent stake in the glass-making firm to Consol Glass and entered into a five-year contract with them to supply bottles for its beer and spirits brands.

The deal, which boosted EABL’s net profit to Sh7.7 billion for the half year to December, also involves the brewer offering Consol management services for a maximum of one year at a fee.

In disclosures made in a shareholders’ circular last May, EABL said it will use the cash to partly repay a Sh20 billion loan ($200 million) that it borrowed from Diageo in 2011.

The brewer pays an interest rate of over 12 per cent on the loan, hence the urgency to clear it.

“The Board considers it appropriate to distribute this dividend in recognition of additional income EABL received from the sale of its subsidiary,” Charles Muchene, the brewer’s chairman, said in a statement.

At the Nairobi Securities Exchange (NSE), such disbursements are rare