Corporate News
EABL managing director Andrew Cowen with his Kenya Breweries Ltd counterpart Jane Karuku. PHOTO | FILE
By VICTOR JUMA, vjuma@ke.nationmedia.com
In Summary
East African Breweries Limited (EABL)
is set to cut shareholders a total interim dividend cheque of Sh1.5
billion despite reporting a 27.7 per cent drop in net profit for the
half year ended December.
The Sh2 per share payout, same as last year, will be made on or about April 21.
The beer maker’s net profit stood at Sh5.5 billion
in the review period compared to Sh7.7 billion the year before when
earnings from normal operations were boosted by a Sh2.2 billion gain
from sale of Central Glass Industries.
Besides the absence of the one-off gain, its profit
in the review period was also weighed down by a 6.2 per cent drop in
sales to Sh35.1 billion.
The EABL said increased taxation of its products including beer has dampened demand through successive price increments.
“There has been four major excise duty increases
affecting bottled beer volumes in the last five years, with the most
aggressive one taking effect in December 2015 — a 43 per cent rise in
duty,” EABL chief executive Andrew Cowan said in a statement.
Excise tax on beer, for instance, increased to
Sh100 per litre in December 2015 from the previous Sh70 per litre. Mr
Cowan said this was the highest excise duty increase in Africa.
The EABL says its sales in Kenya — which account
for 74 per cent of total turnover — were flat in the review period as a
consequence of the higher taxes. The company’s key brands in Kenya are
Tusker, Guinness and Senator.
Higher taxes raised additional revenue for the
government but the brewer says the taxman would have collected more if
beer prices were affordable.
Total indirect taxes rose 10 per cent in the review period to Sh28.8 billion.
“Growth in government revenue (were) behind expectations due to affordability issues,” EABL said in a statement.
Mr Cowan said liquor manufacturers would lobby the
government to devise a predictable tax environment that would help drive
future investment in the sector.
“Because Kenya contributes over 70 per cent of
EABL’s profits, the prevailing tax regime in the region’s biggest
economy has significantly affected the group’s earnings,” he said.
The company invested Sh1.8 billion in the review
period to improve factory efficiencies, introduce new products such as
Tusker Cider and launch new packaging features to fend off counterfeits.
Mr Cowan said EABL would spend another Sh3.2 billion in this
half to increase production of its brands, including Senator which is
popular with low-income earners.
Flat sales in Kenya combined with significant declines in
Tanzania and South Sudan to weighed down the overall turnover, wiping
out a seven per cent growth in Uganda.
Turnover in Tanzania and South Sudan, declined
seven and 97 per cent respectively largely due to depreciation of the
currencies in those markets.
“On a like-for-like basis net sales were flat but
adverse foreign exchange movements and impact of excise tax increase
resulted in a six per cent decline in reported sales,” EABL said in a
statement.
The company’s share price has dropped 17 per cent since the start of the year to trade at Sh220.
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