Centum Investment Company’s potential liability from the 2019 sale of its Coca-Cola bottling businesses dropped by a further $8 million (Sh1.14 billion) in the year to March, an audit of the assets of the companies shows.

The company offered a guarantee when it sold a 27.6 percent stake in Nairobi Bottlers and a 53.9 percent interest in Almasi Beverages —the owner of Mt Kenya Bottlers, Kisii Bottlers and Rift Valley Bottlers— to Coca-Cola Beverages Africa (CCBA) for Sh19.3 billion.

As part of the deal, Centum committed to providing a bank guarantee of $34.4 million (Sh4.9 billion) to CCBA to compensate the buyer for any potential claims, including tax demands from the Kenya Revenue Authority (KRA).

Last year, the guarantee fell by $21.4 million (Sh3 billion) following a Supreme Court ruling that stopped the taxman from claiming taxes on the bottling firms.

The balance has now been reduced further to $5 million (Sh710 million) after an audit of the business assets of the bottlers, which has also wiped out a receivable sum that Centum had hoped to get as part of the deal.

“We wrote off the Sh334 million which was sitting on our books as a receivable. After the reconciliation of the bottlers’ assets, it turned out that there was nothing for us to receive. Similarly, there is no requirement for us to pay CCBA and the guarantee is reduced by a further $8 million,” Centum’s chief executive, James Mworia, said.

“The balance of the guarantee covers any litigation that might arise.”

He added that the guarantee, which protects the interests of Centum and CCBA in the buyer-seller relationship, is expected to run off in 2025.

The reduction in the guarantee has also contributed to a reduction in Centum’s finance costs.

The deal with CCBA was completed despite the KRA seeking Sh5.6 billion in excise taxes on returnable bottles from the bottlers.

The KRA sought to collect excise taxes on costs incurred during washing and sanitising returned bottles between 2006 and 2009.

KRA’s tax demand was thwarted in a Supreme Court ruling delivered on February 10, 2022, which stopped the taxman from reopening the matter that had been decided in lower courts, freeing Centum from the obligation.

Centum’s exposure was, however, smaller because it did not fully own the businesses at the time of selling them to CCBA, which is majority-owned by Atlanta-based soft drinks giant The Coca-Cola Company.

After agreeing on the compensation deal with CCBA, Centum obtained a guarantee from Stanbic Bank Kenya Limited to cover the full amount and the facility was charged to Centum’s portfolio of marketable securities, which includes Treasury bonds.