Crates of beer being moved along a conveyor belt in East African Breweries Limited (EABL) factory. Kenya has ranked position 115 out of 152 in the Competitive Industrial Performance (CIP) Index Report, 2020.

The East African Breweries Limited (EABL) on Wednesday posted a 39% decline in net profit for the full year ended June 30 to Ksh7 billion down from Ksh11.5 billion on COVID-19 movement restrictions.

The Nairobi Securities Exchange (NSE) listed firm recorded a 9% decline in net sales with a 10% growth recorded in the first half of the year being offset by a 29% drop recorded during the second half.

EABL’s profit for the period under review is the lowest recorded in a six-year period and a step back from three consecutive double-digit halves of growth.

“The first half of 2020 was characterized by a stable operating environment which resulted in EABL reporting volume growth of 5%, sales growth of 10% and operating profit growth of 9% versus the prior period,” said EABL Chief Executive Andrew Cowan.

“This trend was sustained through February 2020. In March, governments put in place measures to contain the virus. As a result, there was a significant decline in sales following the closure of outlets and restriction of movement primarily in Kenya and Uganda,” he added.

Cowan said the brewer has been forced to manage capital tightly in light of the prevailing circumstances, reducing discretionary expenditure and reallocating resources such as advertising and promotion (A&P) spend to new and emerging channels to serve consumers safely.

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“During this unwelcome pandemic, our top priority has been to safeguard the health and well-being of our people and support our communities, while taking necessary action to protect our business. Across the markets we have tracked changes in consumer behaviour and repurposed our execution plans in trade to continue serving our consumers where safe and possible to do so,” said EABL Group MD and CEO, Andrew Cowan.

EABL is committing Ksh500 million to support the recovery of bars in Nairobi, Kampala and Dar es Salaam as part of Diageo’s $100 million ‘Raising the Bar’ global initiative.

On Tuesday, President Uhuru Kenyatta ordered for the indefinite closure of all bars over poor observance of social distancing and virus containment measures in entertainment joints. This directive is likely to impact EABL negatively.

The funding will be used to support the implementation of hygiene measures, provision of practical equipment, and provision of free digital support and training to enable outlets to transform how consumers will be served when bars reopen.

“Going forward, our market teams have put in place robust plans to help us emerge stronger from this crisis once the measures are eased across our markets,” he added.

Dividend Pain

EABL shareholders will count themselves as an unlucky lot as the company’s board declined to recommend payment of a final dividend and instead opting to conserve cash due to uncertainity.

The interim dividend of Ksh3.00 per share paid out in April will be all that shareholders get for the period under review.

EABL joins Equity Bank in a list of companies that have preferred to conserve cash and redirected spending to the most vital segments of the business as a means to overcome the economic effects of the pandemic.

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About the Author

Samuel Gitonga is a senior reporter at BUSINESS TODAY. Email: [email protected]

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