EABL chief executive Jane Karuku. FILE PHOTO | NMG
East African Breweries Plc (EABL) has halved its dividend payment to Sh5.50 per share after posting a 20.8 percent drop in profit for the year ended June to Sh12.3 billion.
The company’s board of directors have recommended a final dividend of Sh1.75 per share, adding to the interim payout of Sh3.75 per share, which brings the total to Sh5.5 per share.
This is 50 percent below the prior year’s distribution, which comprised an interim dividend of Sh3.75 per share and a final one of Sh7.25 per share for an aggregate of Sh11 per share.
Read: Diageo Sh22.7bn EABL offer oversubscribed in first phase
The new final dividend will be paid on October 27 to shareholders on record as of September 15.
EABL’s profit drop from Sh15.6 billion a year earlier is largely attributable to higher costs with a cocktail of increased indirect taxes, cost of sales and net finance costs.
Net finance costs, for instance, grew to Sh5.5 billion from Sh4.2 billion previously while the cost of sales touched Sh62.2 billion from Sh56.6 billion.
The rising costs served to offset gross sales which grew marginally to Sh197.6 billion from Sh193.9 billion previously.
EABL attributed part of the costs to the impact of excise increases, inflationary pressures and currency depreciation, stating that the expenses could not be wiped out by increased prices for its range of alcoholic beverages and cost management initiatives.
“Over the past year, our business has navigated an increasingly complex operating landscape characterised by a host of macroeconomic headwinds. Specifically, regional economic slowdown and inflationary pressure not only impacted consumers’ disposable incomes but also significantly increased the cost of doing business,” the brewer said in a statement on Thursday.
“Further, currency deterioration, higher taxes and rising interest rates particularly in Kenya further impacted our business performance. The economic conditions have also led to a resurgence in illicit trade as consumers move to cheaper unregulated products.”
EABL says it witnessed volume contraction as customers adjusted their purchasing behaviour.
The company deployed pricing and improved product mix benefits were offset by the decline in volumes particularly in EABL’s beer category.
Sales in Uganda and Tanzania rose by 17 and one percent respectively but fell by four percent in Kenya.
Despite the operational headwinds, the EABL board of directors have tipped the company to continue delivering growth by investing in its core brands.
Read: Diageo kicks off Sh22.7bn EABL stake raise
EABL is expected to enjoy some tailwinds from the first pause on excise duty on alcoholic products inside five years as further amendments to the rates of duty were omitted in this year’s Finance Bill.
Equally, additional changes carried out in the bill saw Parliament freeze the Kenya Revenue Authority (KRA) from implementing the previously annual adjustments to the rate of excise duty for inflation.
During the year, the company said it invested an additional Sh12.9 billion to complete initiatives to support its long-term growth.
→ kmuiruri@ke.nationmedia.com
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