East African Breweries sales drops as impact of Covid-19 takes toll

East African Breweries sales drops as impact of Covid-19 takes toll

East African Breweries Limited (EABL) has recorded a 9 percent decline in net sales for the financial year ended 30 June 2020, as first half growth of 10 percent was offset by a 29 percent decline in the second half.

The second half decline was due to the impact of the Covid-19 pandemic which saw containment measures implemented across East Africa from late March 2020.

The pandemic impacted EABL’s business performance after three consecutive double-digit halves of growth, with profit for the year declining by 39 percent to Ksh 7 billion from Ksh 11.5 billion in the previous year.

Markets net sales in Kenya declined 14 percent versus prior year. First half growth of 8 percent was offset by second half decline of 37 percent, as the partial lockdown from March to June led to closure of bars and restaurants.

Mainstream and value spirits remained resilient and registered 2 percent growth versus prior year as the category benefitted from a shift of outlet consumption occasions to at-home consumption.

While in Uganda market net sales declined 5 percent compared to previous year, as first half growth of 10 percent was offset by the impact of a total lockdown from March to June resulting in a 21 percent decline in sales in the second half.

However in Tanzania the market net sales grew by 14 percent versus prior year, as first half growth of 19 percent slowed down to 10 percent in the second half as Government restrictions in response to Covid-19 were limited.

Double-digit growth in premium and mainstream beer segments and improved spirits performance supported a strong delivery for the financial year.

“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,” said Andrew Cowan, EABL managing director and CEO.

Cowan noted that across the markets they have tracked changes in consumer behaviour and repurposed execution plans in trade to continue serving consumers where safe and possible to do so.

Mr. Cowan said EABL focussed on managing working capital tightly in the last quarter by reducing discretionary expenditure and reallocating resources such as advertising and promotion (A&P) spend to new and emerging channels in order to serve consumers safely.

EABL has made a significant contribution through trade and community initiatives across the region.

To help East African communities emerge from the effects of the pandemic, EABL has funded provision of hand sanitisers distributed to frontline health workers and vulnerable communities to the tune of Kshs 70 million.

Further, the company donated Kshs 50 million to Kenya’s Covid-19 Emergency Fund, bringing the total contribution towards the pandemic to Kshs 120 million.

In Uganda, UBL donated hospital mattresses, hand-washing stations and fuel to enable frontline health workers to alleviate the situation in healthcare centres.

While in Tanzania, SBL delivered a hygiene awareness programme and donated hand-sanitisers to help combat the spread of the pandemic.

In view of the pandemic’s impact on bar owners across East Africa, EABL is committing Kshs 500 million to support the recovery of on-trade outlets in Nairobi, Kampala and Dar es Salam as part of Diageo’s $100 million ‘Raising the Bar’ global fund.

This 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. We will continue to execute with discipline and invest prudently to ensure we are strongly positioned for a recovery in consumer demand,” said Mr. Cowan.

In recognition of the uncertainty in the external environment in the face of the Covid-19 pandemic and the need to conserve cash to support the business, the Board of Directors do not recommend a final dividend.

Consequently, the interim dividend of Kshs 3 per share paid in April 2020 will be the full and final dividend for the year.

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