- Net earnings dropped by 12% to Sh10.9 billion.
- Significant increases in interest rates and currency devaluation, particularly in the first half of the fiscal saw the firm lose a further Sh3.9 billion.
High living cost saw alcohol consumers cut spending by two percent in the financial year ended June 30, denying East African Breweries (EABL) Sh6.4 billion in revenue.
This coupled with unpredictable tax regimes, forex volatilities, climate change, and political unrest saw the net earnings of the leading brewer in East Africa, commanding 44 percent of the region's alcohol market drop by 12 percent.
Addressing investors in Nairobi on Tuesday, EABL Group MD Jane Karuku said changed spending priorities marred the market.
This saw alcohol share of wallet spending drop, with consumers ditching premium brands for beers and spirits.
The stable's net profit for the full year ended June 30 fell by 12 percent to Sh10.9 billion compared to Sh12.3 billion.
"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,'' Karuku said.
Significant increases in interest rates and currency devaluation, particularly in the first half of the fiscal saw the firm lose a further Sh3.9 billion.
"The results were achieved by leveraging our advantaged portfolio, brilliant commercial execution, and exciting, consumer-led, innovations. Additionally, effective supply productivity allowed us to mitigate some of the impacts of cost inflation,'' Karuku said.
"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."
According to the firm's financial results, the Kenyan shilling lost at least 23 percent in value against the US dollar in the first half of the year. Tanzanian shilling sunk seven percent while that of Uganda appreciated by a percentage but has since dropped by six percent.
Although the firm's tax obligation dropped to Sh5.9 billion from Sh6.4 billion in the previous year, it decried the unpredictable tax regime that compelled the firm to remit excise duty within 24 hours at the beginning of the financial year.
Early this year, EABL revealed that it was compelled to make borrowings of up to Sh2.2 billion monthly, owing to this change in the excise duty regime in the country, a reality that adversely impacted the firm's debt position.
"You now have a whole army reconciling and correcting and because you don't want to underpay and be hit by penalties, you are constantly paying ahead and then trying to get back and rebalance the numbers," EABL chief finance officer, Risper Ohaga said.
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 percent led by beer (nine percent), 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 percent, Uganda at 12 percent and Tanzania at nine percent, while beer and spirits also grew by 12 percent and 14 percent respectively.
The EABL board has declared a final dividend of Sh6 per share, bringing the total dividend to Sh7.00 per share, an increase of Sh1.50 per share compared to the total dividend in the prior year.