This archive report was first published on 30 July 2020.
July 30, 2020
East African Breweries Limited (EABL) has ended its financial year with a liquor stock worth Sh11 billion, a significant increase from the previous year. However, the company's net profits have taken a hit, dipping by 39 percent to Sh7.6 billion, a six-year low.
The brewer's inventory, valued at Sh10.9 billion as of June 30, 2020, reflects a Sh3.6 billion growth compared to the same period last year, and a near 50 percent rise compared to Sh7.3 billion in a similar period in 2019.
However, it is EABL's deteriorating cash position that paints a grim picture of the impact of the COVID-19 pandemic on the sector. The brewer's cash flow statement shows a halving of money generated from its operations from Sh28.4 billion to Sh13.6 billion, indicating that its cash engine is operating at half its capacity compared to the previous period.
According to the financial statements, EABL's cash position shrunk seven times from Sh12.4 billion in 2019 to Sh1.7 billion at the end of its current financial year, resulting in a net decrease of cash and cash equivalents of Sh10.3 billion in the period.
EABL attributed the 39 percent dip in net profits to the COVID-19 pandemic, which also led to a nine percent hit in sales revenue, declining from Sh82.5 billion to Sh74.9 billion.
"As a result, there was a significant decline in sales following the closures of outlets and restrictions on movement primarily in Kenya and Uganda," EABL told investors in its update sent to the Nairobi Securities Exchange (NSE) on Wednesday.
"We responded by remodeling our business to provide our consumers with a variety of options including convenience stores, supermarkets and home deliveries," it said, adding that this commercial effort could, however, not make up for lost sales since the largest share comes from traditional retail outlets, which are bars and restaurants.
