EABL predicts Sh14bn loss in alcohol packaging rules

Google+ Pinterest LinkedIn Tumblr +

The East African Breweries Limited (EABL) assesses it will take an Sh14 billion decline should the proposed change increase the minimum volume of alcohol in a bottle to 750 milliliters be embraced.

The predicted loss will result from write-offs in current machinery and procurement of new ones, changes in packaging set up to fit the new packaging volumes, glass waste, and lost business opportunities due to being edged-out by competitors in the East African markets.

The Alcoholic Drinks & Control (Amendment) Bill, 2020, fronted by Wundanyi MP Danson Mwakuwona, aims at amending the 2010 law by restricting the packaging of alcoholic products in containers of a minimum of 750 milliliters, a move that has attracted mixed reactions from stakeholders.

“The passing of section 2 of the Bill would lead to a massive write-off cost of over Sh3.4billion. All existing beer bottles, cans, crates, plant and machinery spare parts would need to be written off at the current book value,” EABL Group corporate relations director Eric Kiniti in his written submissions to the National Assembly Departmental Committee on Administration and National Security.

“In addition, KBL would need to replace the beer glass packaging, cans, crates and install new machinery to package beer at 750ml, an investment that would cost over Sh7 billion.”

In addition to the fact that EABL’s half-year net earnings to December declined by 47 percent to Sh3.7 billion due to reduced sales and a higher tax provision, the brewer predicts that the change in minimum packaging volume will reduce the bottled beer volume sales 30 reduce sale in spirits by 40 percent.

EABL ascribes this estimate to concerns that consumers will consume illicit brews and contraband alcohol from Tanzania, Uganda, and Ethiopia, where alcohol is less costly.

 

Share.

About Author

Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

Leave A Reply