Inflation may finally be hitting a Kenyan staple that has long been considered to be immune to recession – beer.
This has emerged as East African Breweries Ltd (EABL) revealed Thursday its net profit dropped by 0.39 per cent in the six months to December on the back of higher taxes and input costs, and as price-sensitive consumers shunned the frothy drink.
EABL – which is controlled by Britain’s Diageo and is known for its flagship Tusker beer – saw its net earnings decline by Sh34 million to Sh8.703 billion in the half year from Sh8.737 billion booked in a similar period in 2021.
EABL Group CEO Jane Kalk says inflation and tax hikes are hurting brewers by reducing consumers’ purchasing power, even as rising material costs have pushed up input costs. rice field.
“We are witnessing slowing economic growth across the region, with a sharp increase in commodity taxes in Kenya fueling rising inflationary pressures,” she said in a statement.
“As a result, consumer purchasing power has declined and operating costs have increased significantly.”
Revenue in Kenya declined 1%, offsetting weaker performance in Kenya, despite revenue growth in Uganda and Tanzania of 19% and 11% respectively.
As a result, Brewer’s total turnover jumped to 104.6 billion shillings, an increase of 8.08% from 96.8 billion shillings in the previous year.
“EABL has faced a very difficult time in the context of macroeconomic instability across East Africa, global inflation, and geopolitical turmoil linked to the Russo-Ukrainian war.
“This was exacerbated by sales tax-related price increases in Kenya, which had a significant impact on brand consumption.”
The Nairobi Stock Exchange-listed company smiled at its shareholders by declaring an interim dividend of Sh3.75 per share, as it did at the same time last year, despite poor performance and a bleak outlook. brought
“The Board has declared an interim dividend of Sh3.75 per share, subject to withholding tax, to be paid on or about April 28, 2023 to shareholders of record at the close of business on February 16, 2023. Recommended.”
Inflation in Kenya remains stubbornly high, as it was last year when food prices soared, and is above the Central Bank of Kenya’s target range of 2.5-7.5%.
This has left many households, especially low-income households, with a shopping basket in an environment where salaries are frozen as businesses recover from the economic hardships of Covid-19 and face the global economic impact of the Ukraine war. have been forced to reduce
Rising prices on essentials forced employees to cut spending on non-essentials like beer and airtime, ultimately hurting companies like EABL and Safaricom.
EABL said multiple excise tax hikes in Kenya over the past 15 months have worsened consumer prices, particularly impacting price-sensitive consumers in mainstream and value segments.
“The negative impact on volume denies potential revenues for governments and has a compounding effect on farmers’ livelihoods and small businesses that support value chains,” the company said.
“While short-term volatility is expected to continue, we remain focused on executing our strategy and delivering sustainable growth over the long term.”