The consistent rise in excise duty on alcohol in Kenya since last July has dipped East African Breweries Ltd’s (EABL) sales in the country by one percent, flattening the group’s profit in the half year to December 2022.
Its net profit in the period stagnated at Ksh8.7 billion ($69.9 million), compared with its half-year profits in December 2021, which was more than double the $33.11 million recorded the previous period as Covid-19 restrictions eased across the region.
The brewer said the flat growth was largely due to a steep rise in excise taxes in Kenya, its largest market, resulting in price increases that significantly affected consumer purchasing patterns.
Kenya’s budget for the 2022/23 financial year raised excise duty on beer and spirits by 10 percent and 20 percent respectively
The levies rose again by a further 6.3 percent in October in the form of annual inflationary adjustment.
“These increases came on the back of an annual upward excise adjustment in 2021, leading to a compounded annual excise tax increase of 23 percent for beer and 34 percent for spirits,” read a statement Thursday.
Jane Karuku, EABL’s chief executive said apart from the rise in taxes, the business environment in the first half of the financial year ending in June has been difficult, with various factors weighing down growth of sales.
“EABL faced an exceptionally challenging time related to macro-economic volatility and drought across East Africa, global inflation, and geo-political disruptions related to the Russia-Ukraine war,” Ms Karuku said.
Risper Ohaga, the chief finance officer, said inflation and the rise in excise duty were the leading factors that saddled their growth in the period, leading to a 0.9 percent decline in earnings before interest and tax.
Net sales, however, defied the tough times to record a four percent rise from last year’s $479 million, buoyed by sustained growth its Uganda and Tanzania subsidiaries.
The brewer declared an interim dividend of Ksh3.75 ($0.030) per share, similar to last year’s, and will pay a total of $23.8 million to shareholders.
