EABL Shares Plummet 6.8% as Dividend Halved to Sh5.5
East African Breweries Limited (EABL) witnessed a significant decline in its shares, which dropped by 6.8% during Friday’s trading session at the Nairobi Securities Exchange (NSE). The sharp decline followed the brewer’s decision to slash its dividend for the financial year that ended in June, reducing it to Sh5.5 compared to the previous period.
By the end of trading, the company’s stock closed at Sh153.50 per share, down from Sh164.50 on Thursday. However, it’s worth noting that the trading volume was relatively low, with only 11,800 shares changing hands throughout the day.
EABL’s decision to reduce the dividend came after it announced a 20.8% decrease in its net profit for the year, which amounted to Sh12.3 billion. The decline in profit was primarily attributed to higher indirect taxes, increased cost of sales, and rising net finance costs.
Consequently, the company recommended a final dividend of Sh1.75 per share. When combined with the interim payout of Sh3.75 per share, this brings the total dividend to Sh5.5. However, this represents a 50% decrease compared to the distribution made in the previous financial year, which consisted of an interim dividend of Sh3.75 per share and a final dividend of Sh7.25 per share, totaling Sh11.
EABL’s stock is part of a group of prominent blue-chip companies, including Safaricom, KCB, and Equity Group. These stocks have remained attractive to investors due to their stable dividend payout policies and solid business fundamentals. They also dominate trading in terms of turnover at the NSE.
Prior to EABL’s financial results announcement, its share price had experienced an upward trend, rising from Sh152 to Sh164.50. This suggested that investors were expecting a relatively unchanged dividend payout. The company had maintained its interim dividend at Sh3.75 per share in its half-year results (to December 2022), with a marginal decline in profit from Sh8.73 billion to Sh8.7 billion compared to the previous year.
However, in the second half of the financial year, EABL’s performance was impacted by various factors, including inflationary pressure, which reduced consumers’ disposable incomes and increased the cost of doing business. Additionally, the company cited currency deterioration, higher taxes, and rising interest rates as contributing factors to its financial challenges.
The decision to lower the dividend reflects EABL’s attempt to navigate through the difficulties it faced in the past year. Moving forward, the company will need to address these challenges effectively and leverage its solid business fundamentals to regain investor confidence.
While this news may be disappointing for EABL shareholders, it is important to assess the broader economic landscape and market conditions that influenced the company’s decision. By presenting a balanced view of the topic, readers can gain a better understanding of the factors at play in the market and make informed investment decisions.
