Tanzania: Tanzania Breweries completes sale of dormant Darbrew unit

Tanzania Breweries Ltd (TBL) Plc has completed the sale of its entire 60 percent stake in the beer manufacturing subsidiary Darbrew Ltd and launched a facelift of its production facility at Kibo Breweries Ltd as part of a turnaround plan for the struggling dormant units, The East African reported on July 25.

The Dar es Salaam Stock Exchange-listed brewer approved the sale of Darbrew Ltd to a core shareholder Dar es Salaam City Council (DCC) on August 7, 2019, due to the non-performance of the subsidiary, but the conclusion of the deal has been delayed for years on undisclosed reasons.

The company disclosed in its 2023 annual report that the transaction was completed during the accounting period ended December 31, 2023, as the beer maker moved to shore up its cash flow position amid a cocktail of domestic and global factors, including a significant increase in the cost of production and overheads as a result of the global supply chain disruptions caused by the conflict in the Middle East and eastern Europe.

Locally, the company was impacted by the significant increase in excise duty on raw materials used in the production of beer, exceptionally wet weather and load shedding by the utility, Tanzania Electric Supply Company Ltd (Tanesco).

“During the year, management executed the Board’s approved disposal of the Darbrew Ltd made on August 7, 2019. The disposal involved offloading 60 percent of the Company’s investment in Darbrew Ltd to Dar es Salaam City Council (DCC), a core shareholder. The sale was executed on May 2, 2024, where the Sale Agreement, Transfer of Share Deeds and other documentations including formal handovers to the DCC were completed,” the company says.

“Decision was made due to non-performance of the Darbew Ltd in its business. Darbrew Ltd remained a dormant operation, and as of December 31, 2023, the subsidiary was held for sale (discontinued operations).”

On the other hand, TBL’s management opted to upgrade the production facility at Kibo Breweries after the subsidiary remained dormant throughout the year, despite a Tsh42.41 billion ($15.83 million) investment.

“Kibo Breweries remained dormant throughout the year. Management continues to upgrade the production facility of the entity and it expects the malting plant to be completed in the year 2024,” the company says.

“During the year, management performed an impairment assessment of its investment in Kibo Breweries Limited. No impairment allowance was recognised.”

In July 2023, the group announced its decision to invest and upgrade the Kilimanjaro Malting Plant after halting operations for six years -- since 2017 -- due to insufficient local barley grown in the area.

High water usage and electricity costs as well as outdated technology consuming too many resources prevented the plant from restarting.

The plant is projected to process about 10,000 tonnes of barley in the initial phase and scale up to 28,000 tonnes of barley, contributing significantly to Tanzania's agricultural economy and enhancing the welfare of the barley farming communities.

The initial phase of the project is expected to be operational by the fourth quarter of 2024.
“We are committed to empowering farmers through advanced agricultural techniques, business and financial literacy, which will in turn increase the value chain and benefit farmers who grow barley, sorghum and grapes,” the company says.

Currently, TBL procures 74 percent of its raw materials from within the country.

TBL Plc is 63.95 percent owned by Anheuser-Busch InBev (AB InBev), the world’s largest brewer with operations in over 50 markets and a presence in 15 African countries.

The company’s principal activities are the production, distribution and sale of malt beer, non-alcoholic malt beverages and alcoholic fruit beverages in Tanzania, and exports to Nile Breweries Ltd and Zambia Breweries Ltd, all subsidiaries of AB InBev.

TBL has a controlling interest (65 percent) in a spirituous liquor company, Tanzania Distilleries Ltd, and 60 percent in Darbrew Ltd.

It fully owns Kibo Breweries Ltd.

In 2023 the group’s cash generated from operations declined by nine percent to Tsh335.86 billion ($125.42 million), from Tsh368.82 billion ($137.73 million) in 2022.

A total of Tsh87.53 billion ($32.68 million) was capital expenditure during the year, compared with Tsh82.35 billion ($30.75 million) invested in 2022.

“A capital investment plan is in place to ensure the optimal operation of all breweries and distilling plant. The Group and Company have set plans to ensure production, sales and market share are increased, maintained and sustained in the near future,” the company says.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .