East African Breweries Ltd (NSE: EABL) 1H21 Earnings Note
East African Breweries Ltd (NSE: EABL) announced weak y/y performance as expected but a rebound h/h with net revenue down 3.1% y/y (+53.2% h/h) to KES 44.5Bn. The h/h recovery follows relaxation of pandemic-related restrictions in the July-Dec 2020 period with volumes (-5.0% y/y) and sales almost normalizing to pre-pandemic levels in 2019. In addition to the weak volumes, the business grappled with weaker currency, higher direct costs (gross margin at 43.5% from 47.7% in 1H20) and one-off tax provision which led to a faster drop in Profit Before Tax (PBT) of 45.0% y/y despite the resilient sales. Citing increased uncertainty in the business environment, there will be no interim dividend for the financial year (KES 3.00 in 1H20). With expectations of steady recovery in the economy and consumer sentiment, we maintain our BUY rating at a target price of KES 194.32. However, the lack of an interim dividend is a negative for investors.
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