EABL retains dividend despite profit dip

East African Breweries Limited (EABL) has retained its dividend payout rate despite a 14.79 per cent drop in net profit in the year ended June.

Higher costs and tax expenses weighed down the NSE-listed brewer, which reported a net profit of Sh7.25 billion in the period compared to Sh8.51 billion a year earlier.

The firm, which is controlled by Britain’s Diageo, declared a final dividend of Sh5.50 per share, unchanged from 2017, raising the total payout for the year to Sh7.50 per share same as last year.

Bottled beer business in Kenya and Tanzania, as well as the spirits segment, helped to raise EABL's revenue by 4.57 per cent to Sh73.45 billion.

The company’s total costs jumped 15.93 per cent to Sh20.66 billion on the back of the expansion of its plants and increased promotional activities, said the brewer.

“Profit after tax declined by 15 per cent as a result of a one-off tax provision but strong underlying performance with robust cash flow delivery secured the necessary funding for the higher investment in the period,” said the EABL in a statement.

Finance director Gyorgy Geiszl said a Sh2 billion tax provision reduced its net earnings.

“It’s a one-off provision for tax exposure,” he said.

Managing director Andrew Cowan said its lower-end keg beer suffered a 13 per cent decline in sales due to political uncertainty in Kenya during the first half of 2018 and temporary closure for an upgrade of its Nairobi-based Ruaraka plant. The brewer installed new rackers — equipment used to fill kegs or containers with beers — during the Sh800 million upgrade.

Mr Cowan said the EABL’s spirits net sales increased eight per cent in the full year, driven by a strong performance of its mainstream spirits portfolio (up 23 per cent) while beer sales increased four per cent, due to the growth of bottled beer.

“We see a strong comeback for the Senator keg,” he said.

The company said its new plant in Kisumu is complete and is set for commissioning “later this year” setting the stage for creation “of over 100,000 direct and indirect jobs”.

“In the year, we have spent Sh13 billion in capital expenditure with Sh7.8 billion of that being spent on the Kisumu brewery,” said Mr Cowan.

“EABL has already contracted over 15,000 farmers to supply the new brewery with sorghum for production of the low-priced Senator brand, enabling EABL to leverage opportunities to recruit consumers from the illicit alcohol market,” added the brewer.