Kenya: East African Breweries’ dividend payment up thanks slower drop in profitability in the year ended June 30

East African Breweries Plc (EABL) has increased dividend payment for the year ended June 2024 by 27.27 percent to Sh7 per share, or Sh5.5 billion in total, after posting a slower drop in profitability, Business Daily reported on July 31.

The firm’s board has proposed a final distribution of Sh6 per share in addition to an interim payout of Sh1 per share that was distributed in April.

The proposed dividend, to be paid on October 28 to shareholders who will be on EABL’s register by September 16, will make the total payout higher than the Sh5.5 per share last year, but smaller than Sh11 per unit for the year ended June 2022.

This means the giant brewer, with operations in Kenya, Uganda and Tanzania, will spend nearly Sh5.54 billion in payouts to shareholders compared to Sh4.35 billion last year.

The firm spent a record Sh8.7 billion on dividends for the year ended June 2022, after freezing the distribution in the prior year when earnings had been battered by Covid-19 pandemic shocks.

The proposed dividend will take up half (50.92 percent) of profit it generated during the year under review, compared with a payout rate of 35.29 percent a year earlier.

EABL on July 30 reported that net income dropped 11.79 percent to Sh10.87 billion, marking the second year running that profit has fallen. The decline was, however, softer compared with 20.87 percent for the year ended June 2023 to Sh12.32 billion.

The firm attributed the slide in net profit largely to elevated cost of borrowing and weakening of the shilling against the dollar in the review period.

“Interest rates continue to be a concern especially in Kenya and also forex (losses),” Jane Karuku, EABL’s managing director, told an investor briefing in Nairobi.

“The last time we were here for the half year results (January), we were talking about a drought and now we are talking about floods and other social unrest, (spurred by youth-led anti-government protests). Our consumers, therefore, continue to be impacted by pressure from spend perspective and are having to re-prioritise on what they need to spend on.”

In a year the government kept excise taxes on alcoholic drinks unchanged, EABL’s net revenue –after indirect taxes— grew 13.21 percent to Sh124.13 billion from Sh109.65 billion the year before, on improved sales across its markets.

The benefits of double-digit sales were, nonetheless, eroded by macroeconomic shocks of rising interest rates, higher input and distribution costs and depreciation of currencies largely in Kenya and Tanzania.

EABL's net finance costs jumped by half (49.04 percent) to nearly Sh8.18 billion, while the firm booked an 84.34 percent surge in foreign exchange loss to Sh3.87 billion due to the weakening of the shilling. The currency loss increased from Sh2.10 billion last year and Sh209 million in the year ended June 2022.

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