EABL profit down 12% to Sh10.9bn on currency devaluation

East African Breweries’ net profit for the full year ended June 30 fell by 12 per cent to Sh10.9 billion as devaluation of the Kenyan shilling wiped out gains made in net sales during the period.

The profit dropped from Sh12.3 billion that the brewer recorded in a similar period last year, from its business across the region’s key markets of Kenya, Uganda and Tanzania.

The weak local currencies coupled with a tough microeconomic environment saw the net earnings drop, despite the brewer’s net sales increasing 13 per cent to Sh124.1 billion, up from Sh109.6 billion last year.

Operating profit excluding forex effects closed the period at Sh28.8 billion, up 10 per cent from Sh26.3 billion last year.

The increase in net sales came despite reduced spending power in the consumer market as households navigated tough economic times.

The growth has been attributed to volume growth of one per cent led by beer (+9 per cent), strategic pricing, a strong portfolio boosted by disruptive innovation, solid commercial execution, and supply productivity.

Growth was recorded across its three core markets with Kenya at 15 per cent, Uganda 12 per cent and Tanzania nine per cent, while beer and spirits also grew by 12 per cent and 14 per cent, respectively.

According to management, EABL achieved these results on the backdrop of a challenging and unpredictable operating environment, characterised by reduced consumer purchasing power driven by the higher cost of living, as well as disruptions brought about by El Nino rains and political unrest.

Significant increases in interest rates and currency devaluation, particularly in the first half of the fiscal, increased the Group’s cost base majorly impacting profitability, as the company’s profit after tax dropped.

Even so, the EABL board has declared a final dividend of Sh6 per share, bringing the total dividend to Sh7 per share, an increase of Sh1.50 per share compared to the total dividend in the prior year.

"We have delivered a solid double-digit topline and operating profit growth in a challenging environment, highlighting the strength of our core business and our ability to capture market opportunities effectively," EABL Group managing director and CEO, Jane Karuku, said on Tuesday.

The results, she said, were achieved by leveraging the group's advantaged portfolio, brilliant commercial execution, and exciting, consumer-led, innovations.

Additionally, effective supply productivity allowed the group to mitigate some of the impact of cost inflation.

 “Our new microbrewery continues to accelerate our innovation pipeline to tap into the next generation of consumers, while the investment in our digital capabilities has assisted us in serving our customers and consumers more efficiently," Karuku addded.

She said EABL continues to make great progress against its Environmental, Social and Governance goals, surpassing its targets for the year.

"Looking ahead, we remain committed to delivering consistent and sustainable long-term growth and our F24 results give us confidence that we are well positioned to do so,” she said.