East African Breweries Limited (NSE:EABL) reported a marginal net profit drop in the year ended June as higher costs offset increased sales, with the company freezing dividend payouts to preserve capital.

The firm’s net earnings in the review period stood at Sh6.96 billion compared to Sh7.02 billion a year earlier.

“In recognition of the continued uncertainty in the external environment due to Covid-19 related restrictions, the directors do not recommend a final dividend,” EABL said in a statement.

The company last paid an interim dividend of Sh3 per share for the half year ended December 2019.

Its dividend last peaked at Sh8.5 per share in the year to June 2019.

Net sales jumped 14.7 percent to Sh85.9 billion, with most of the growth coming in the second half when Covid-19 restrictions in the East African countries were less severe compared to the first half.

The company also adapted to the pandemic, finding new routes to market including distributing products to consumers’ homes.

Sales in the Kenyan market rose 11 percent, particularly in spirits while demand for beer was hurt by restrictions including closure of bars and night-time curfew which reduced drinking hours at social joints.

Uganda’s sales grew by the largest margin of 24 percent, helped by increased demand for beer and production capacity expansion. Sales in Tanzania increased 10 percent.

The higher turnover was accompanied by cost escalation across production, distribution and other areas, holding down the bottom-line.

Undisclosed costs increased the most by Sh2.6 billion to Sh9.8 billion while administrative expenses expanded by Sh755 million to Sh9.3 billion.

Selling and distribution costs also increased by Sh771 million to Sh7.3 billion. The company invested Sh7.8 billion in the period in what it says will support growth.

“We are cognisant of the fact that the uncertainty posed by the pandemic will continue. However, we are confident that our strategy is working and will continue to focus on business recovery to grow top line and recover margin,” EABL’s chief executive Jane Karuku said in a statement.