EABL's Profit Dips as Stock Increases to Ksh 11 billion
Kevin Namunwa  |  Jul 31, 2020
       

In the wake of the Coronavirus pandemic Kenya, one of the most hit sectors has been the liquor sector.

Kenyan brewing companies continuously count loses as the government’s corona virus restrictions has not been fair them. East African Breweries Limited (EABL) has ended its financial year with liquor stocks worth Ksh 10.9 billion.

In its end of year results, EABL’s profits have plunged by 39% to Ksh 7.6 billion, a six-year low. Th


This provides a financial peek into just how the Covid-19 pandemic is hurting the beer industry, and wiping away billions of shillings in profits.

According to the brewer, the stock stuck at its depots is valued at Ksh 10.9 billion as at June 30, 2020. There has been a Ksh 3.6 billion difference in excess stock from last year’s figures. Last year’s inventory was valued at Ksh 7.3 billion bringing the rise to nearly 50%.

The company’s cash engine has been operating at half its capacity compared to its previous period which explains why it is struggling to make profits. This year the company generated Ksh 13.6 billion from its operations which is very low compared to last year’s 28.4 billion.

 Cash is one of the most important measures of the performance of any company and when it stops flowing, it forces companies into drastic cost-cutting measures to stay afloat.

The financial statements show that the brewer’s cash position shrunk seven times from Sh12.4 billion in 2019 to Sh1.7 billion at the end of its current financial year. This resulted in a net decrease in cash and cash equivalents of Sh10.3billion in the period.

COVID-19

The pandemic is majorly the reason why the brewer has struggled in its past financial year.

The brewer claims it had a stable first half of the year which saw a growth of 5% in its volume and a 10% growth in sales. Its operating profit in the first half was up nine percent compared to the previous period.

“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 explained the profit dip to 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,” the brewer noted.