East African Breweries Ltd. (EABL) saw its net income fall by 21% to Sh12.3 billion in the fiscal year that ended in June as a result of the declining shilling, which cost them Sh2.1 billion.
The shilling decreased by 20.8 percent between July 1, 2022, and June 30, 2023, according to data from the Central Bank of Kenya (CBK), which resulted in increased import costs for businesses like EABL
“We have seen very rapid depreciation of the shilling given that we started off at about 117 to the US dollar and closed at about 142 with most of the depreciation happening in the second half of the accounting period,” EABL chief financial officer and head of strategy, Risper Ohaga, told the Business Daily.
“With scarcity of raw materials, we ended up importing more and that translated into bigger foreign exchange hits so we do have about a Sh2.1 billion hit on foreign exchange.”
In the reviewed period, the brewer’s cost of goods sold climbed by 10.1% to Sh62.2 billion, devouring 56.0% of its net revenues, up from 51.0% in the prior year.
EABL claims that although access to the US dollar to pay its import bill improved between January and June 2023 and July to December 2022, the manufacturer’s exposure to foreign exchange see-saws was amplified due to the lack of locally available raw materials.
Following the government-to-government agreement with Gulf countries to import petroleum products, which has improved dollar liquidity due to deferred payments by oil marketing companies estimated at $500 million per month, access to the US dollar improved in the second half of EABL’s reporting period.
