Finally, hop at last: Tanzania Breweries has sold its dormant Darbrew unit

In a move to revitalize its struggling dormant units, Tanzania Breweries Ltd (TBL) Plc has successfully sold its entire 60 percent stake in the beer manufacturing subsidiary Darbrew Ltd. Additionally, TBL has also initiated a facelift of its production facility at Kibo Breweries Ltd, signaling a comprehensive turnaround plan.

The Dar es Salaam Stock Exchange-listed brewer has finally approved the sale of Darbrew Ltd to a core shareholder, the Dar es Salaam City Council (DCC), after years of delay. The subsidiary’s non-performance has been the primary reason behind this decision, although the exact reasons for the delay remain undisclosed.

The company stated in its 2023 annual report that the transaction was finalized during the accounting period ending on December 31, 2023. This move was made to strengthen the company’s cash flow position in response to various domestic and global factors. These factors included a notable rise in production costs and overheads due to the global supply chain disruptions caused by the conflict in the Middle East and eastern Europe.

Similar to a quantitative analyst, the company faced challenges due to the substantial rise in excise duty on raw materials for beer production, unfavorable weather conditions, and power outages by the utility, Tanzania Electric Supply Company Ltd (TANESCO).

Management successfully executed the Board’s approved disposal of Darbrew Ltd on August 7, 2019. The Company sold 60 percent of its investment in Darbrew Ltd to Dar es Salaam City Council (DCC), a core shareholder. The sale was completed on May 2, 2024, with all necessary documents and formal handovers to the DCC being executed, according to the company.

The decision was made based on the underperformance of Darbrew Ltd in its business. Darbrew Ltd continued to operate in a dormant state, and by December 31, 2023, the company’s subsidiary was being prepared for sale as part of discontinued operations.

Kibo upgrade

However, TBL’s management made the decision to improve the production facility at Kibo Breweries, even though the subsidiary had been inactive for the entire year, despite a significant investment of Tsh42.41 billion ($15.83 million).

Kibo Breweries had no activity throughout the year. The company states that management is actively improving the production facility and anticipates the completion of the malting plant by 2024.

Management conducted an impairment assessment of its investment in Kibo Breweries Limited during the year. No impairment allowance was recognized.

The Kilimanjaro plant

In July 2023, the group made the decision to invest in and upgrade the Kilimanjaro Malting Plant. The plant had been closed for six years since 2017 due to a lack of locally grown barley in the area.

Excessive water usage and soaring electricity costs, coupled with outdated technology that guzzled resources, hindered the plant from resuming operations.

With its impressive processing capacity, the plant is set to make a substantial impact on Tanzania’s agricultural economy and bring about positive changes for the barley farming communities. Initially handling 10,000 tons of barley, the plant has plans to scale up to an impressive 28,000 tons.

The project is projected to be operational by the fourth quarter of 2024.

Our company is dedicated to equipping farmers with cutting-edge agricultural techniques, as well as providing them with the necessary business and financial knowledge. By doing so, we aim to enhance the value chain and ultimately improve the livelihoods of farmers cultivating barley, sorghum, and grapes.

TBL stakes

At present, TBL sources 74 percent of its raw materials domestically.

TBL Plc is majority owned by Anheuser-Busch InBev (AB InBev), a global brewing company with a strong presence in numerous markets worldwide, including 15 African countries.

The company primarily focuses on producing, distributing, and selling malt beer, non-alcoholic malt beverages, and alcoholic fruit beverages in Tanzania. It also exports its products to Nile Breweries Ltd and Zambia Breweries Ltd, both of which are subsidiaries of AB InBev.

As a quantitative analyst, it is important to note that TBL holds a controlling interest of 65 percent in Tanzania Distilleries Ltd, a spirituous liquor company, and 60 percent in Darbrew Ltd.

It has complete ownership of Kibo Breweries Ltd.

In 2023, the group’s cash generated from operations decreased by nine percent to Tsh335.86 billion ($125.42 million), compared to Tsh368.82 billion ($137.73 million) in 2022.

During the year, a total of Tsh87.53 billion ($32.68 million) was allocated to capital expenditure, which is an increase from the Tsh82.35 billion ($30.75 million) invested in 2022.

We have implemented a capital investment plan to guarantee the efficient functioning of our breweries and distilling plant. The Group and Company have established strategic plans to drive growth and secure a strong position in production, sales, and market share for the foreseeable future,” the company states.