Beer maker East African Breweries Ltd (EABL) has taken a hard hit from the closure of bars and restaurants in the wake of the Covid-19 pandemic, becoming the first listed company in the region to issue a profit warning.
The profit alert means that EABL’s net earnings will fall at least 25 per cent, or by Ksh2.87 billion ($28.7 million) in the financial year ending June 2020.
More companies are expected to issue similar profit warnings as effects of the widespread economic shutdowns become apparent.
Kenya, Uganda and Rwanda have enforced the strictest lockdowns within the East African Community (EAC) countries to curb spread of the coronavirus, while South Sudan, Tanzania and Burundi have also issued public health advisories that have had varied adverse impact on economic activity.
"We are not surprised with this profit warning and you realise that it is not going to be EABL alone," said Paul Mwai, chief executive of AIB Capital, a Nairobi-based stockbrokerage and corporate finance advisory firm.
"It will not be a surprise to see more companies in manufacturing, hotel and hospitality sectors issuing profit warnings."
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EABL, which is listed on the Nairobi Securities Exchange (NSE) and cross-listed on the Dar es Salaam Stock Exchange (DSE) and the Uganda Securities Exchange (USE) where it also has processing plants, reported an after tax profit of Ksh11.51 billion ($115.1 million) last year.The management now says measures put in place to contain the deadly pandemic will see net earnings fall sharply to about Ksh8.64 billion ($86.4 million).The projected profit will, however, still surpass the 2018 net earnings of Ksh7.25 billion ($72.5 million).Regional governments were quick to enforce social distancing regulations and order shutting down of bars, restaurants, hotels and other entertainments spots that are key sales points for the giant brewer after initial cases of the respiratory infection were reported in the region in March.Drinkers have not been spared either, the pandemic has eroded their incomes through job losses, pay cuts and closure of businesses, leaving them with little or no disposable cash to buy alcohol, further dampening EABL’s earnings prospects.EABL’s net revenue increased by 12 per cent last year to Ksh82.5 billion enabling the giant brewer to pay its shareholders a total dividend of Ksh8.50 per share.Prior to the Covid-19 pandemic the brewer’s biggest headache was stringent government regulations […]
