Why EABL shares rose today

By Nairobi Stocks Review

Shares of beer maker East African Breweries (EABL) rose 1.53% on August 2 to close at Ksh182.25. The rise can be attributed to two reason.

First, investors appeared excited by the company’s move to further increase its stake in its Tanzania subsidiary called Serengeti Breweries. EABL now owns 85% of the unit from 55% previously. Serengeti Breweries’ growth is promising and EABL has been buying up more stake in it.

Second, the rise in EABL shares can also be attributed to investors rushing to buy the dip. The company reported a drop in profit for the financial year ended June 2021. It also said it will not pay dividends for the year.

The profit drop and absence of dividend caused EABL shares to fell nearly 3% on July 30. At the current price, EABL shares are trading sharply below their all-time high of about Ksh318 reached in May 2013.

EABL continues to struggle with challenges brought about by the Covid-19 pandemic. For example, its operating expenses have gone up, raising the need to freeze dividend payments to conserve cash.

Some investors believe the company’s woes are temporary and that the stock will rebound once the pandemic gets out of the way. Those investors are taking advantage of the current dip to buy more EABL shares.

Is KBL the same as EABL?

EABL is a group of breweries operating mostly in the East African region. It has subsidiaries in Kenya, Uganda and Tanzania. KBL (Kenya Breweries Limited) is the group’s Kenyan subsidiary. KBL is the group’s largest unit, accounting for 66% of revenue in the 2021 financial year.

Who owns East African Breweries?

A British company called Diageo is the largest shareholder in EABL with a stake of more than 50%. EABL shares are listed on the Nairobi Stock Exchange as well as the stock exchanges in Uganda and Tanzania.