EABL records 22% decline in after tax profit

One such manufacturer is East Africa Breweries Limited which now says, that the currency depreciation in Kenya has forced them to look for ways to maximise their operation in markets outside of Kenya, increasing their exports and looking for ways to maximise their operation in markets with foreign currencies that are holding better than Kenya.

"We are growing much faster in the market outside of Kenya, so whether it is from an export perspective or from markets just outside Kenya their growth is helping us, one because our currency is now weaker against theirs, but also as they grow then you're able to mitigate the risk in one territory, compared to another."

So we are pushing growth in export we are pushing growth where we are getting revenue in foreign currency and where the environment is still not as bearish as we are currently experiencing," says EABL CFO Risper Ohaga.

On her part, EABL CEO Jane Karuku says "Kenya is really suffering whether it’s the pound or it’s the dollar. We are suffering both at the cogs levels I mean cost of goods because we have some dollar pound denominated cost and then also as we report our statutory… Obviously, Tanzania and Uganda are doing better than us from a currency perspective."

Despite increasing their volumes, the brewer has expressed concerns over the consumer's wallet, noting that they have opted for lower value and discounted products in the wake of harsh macroeconomic environment, which has forced them to reprioritise their expenditure contracting the expenditure on alcohol by 200 basis points in the half year.

"I think the biggest threat to the business is the consumer's affordability piece in terms of the wallet contracting, the other one is the cost of doing business, remember I talked about we’ve seen electricity go up, fuel cost go up, so from a Kenyan and across East Africa perspective cost of doing business is going up but more importantly, I think the interest cost and forex cost are stressing the bottom line much more," adds Karuku.

In the concluded half year, EABL recorded a Ksh.2.3 billion loss in foreign exchange pressure owing to the depreciation of the shilling.

The brewer also saw a 22 percent decline in profit after tax of Ksh.6.8 billion down from Ksh.8.7 billion the previous years, as the cost of sales increased by 21 percent on the back of high inflation that saw input costs sore.

While actual sales increased by 16 percent to stand at Ksh.66.5 billion up from Ksh.57.3 billion the previous year. The same half the brewer registered an 18 percent growth in beer sales with spirit sales slowing down to only growth 13 percent on the back of higher excise tax and input cost.