East African Breweries Plc (EABL) paid record royalties and management fees of Sh2.2 billion to entities linked to its parent firm Diageo, boosting the earnings of the multinational from the local subsidiary in the year to June 2025.
Disclosures in the brewer’s corporate bond information memorandum show that payments made to companies related to EABL ‘through common shareholding’ climbed from Sh2.08 billion in the year ended June 2024 and Sh1.77 billion in the prior year.
The charges, largely paid for the use of Diageo’s global brands and management support services, have increased earnings for the London-based parent which controls a majority 65 percent stake in the Nairobi Securities Exchange-listed firm.
Diageo says its sales comprise royalties and revenue from contracts with customers in addition to rents receivable.
EABL’s disclosures indicate that Diageo continues to exert strong influence in the local subsidiary through multiple channels -from ownership to supply, brand licensing and strategic management.
The royalty payments are largely tied to sales volumes of global brands such as Johnnie Walker, Guinness and Smirnoff, which are owned by Diageo but brewed or distributed locally under licence.
EABL is among Kenya’s large firms that have paid billions of shillings to their parent firms in royalties and other fees. Bamburi Cement paid its former controlling shareholder Lafarge a total of Sh27.2 billion for technical services in the 25 years to December 2024, marking one of the largest such transactions between a Kenyan firm and its multinational parent.
EABL’s latest filings also show a sharp increase in purchases from companies affiliated to Diageo, which jumped more than half (53.31 percent) to Sh8.48 billion in the review period from Sh5.53 a year earlier.
Balances payable to the parent and its affiliates, on the other hand, also climbed by more than a third (36.31 percent) to nearly Sh7.7 billion.
EABL says all the intercompany transactions are transparent and reflect how independent parties would trade as they act in their own self-interest.
‘All business transactions with all parties, directors or their related parties are carried out at arm’s length,’ the company says in its statement on management of conflict of interest.
The brewer’s disclosure of the rising intercompany transactions comes as it seeks to raise up to Sh20 billion through a new domestic bond under its medium-term note (MTN) programme.
The latest cash call follows EABL’s announcement that it will redeem its existing Sh11 billion bond at the end of this month, a year ahead of the scheduled maturity in October 2026.