Business Daily (Nairobi)
Jim Onyango
3 March 2008
Beer marker, East African Breweries, said yesterday its half year net profits jumped 28 per cent to Sh 3.8 billion on the back of increased sales mainly in its Kenyan market. The Nairobi Stock Exchange listed company recorded Sh3 billion during the same trading period in 2006.
The financial result, termed as impressive by analysts, was sweet music to the ears of shareholders who are waiting for a proposed interim dividend of Sh2.40 per share, up from Sh2.15 a year ago.
The unaudited results exited the beer marker's counter at the Nairobi Stock Exchange, closing at Sh160 up from Sh155 on Friday. EABL is also cross-listed on Tanzania's and Uganda's stock markets.
The company said the Kenyan market alone contributed 66 per cent of the group's Sh16 billion revenues in the half year trading period ended December 31, 2007. At the same trading period in 2006, the company raked in Sh12.6 billion in revenue.
"It is extremely positive sign in the environment we operate...Kenya has provided the powerhouse of revenue growth," EABL group commercial director Chris Caldwell said at a meeting of investors yesterday.
EABL runs six companies, among them Kenya Breweries, Uganda Breweries, International Distillers Uganda, East African Maltings, Central Glass Industries and UDV Kenya. It also has a stake in Tanzania Breweries.
The company, largely owned by the world's biggest drinks group, Diageo, plans to install a new Sh3 billion packaging plant, Sh1.3 billion to expand its glass plant and Sh1 billion to expand its malting plant so as to increase capacity.
The EABL half year results are impressive and encouraging. Further with that huge free cash flow, EABL management may be tempted to invest in expansion projects which may not be aligned or is in the best interest of the shareholders" said Mr. Odhiambo Ocholla, an analyst with Suntra Investment Bank.
Speaking at the investor briefing yesterday, EABL Group Managing Director Gerald Mahinda said: "Mid-last year we did finish the installation of our new Sh1.6 billion SAP software and we have started reaping the benefits of it as it has increased our production efficiency. All our key processes, including manufacturing, procurement, inter-company transaction and HR are now IT driven".
Mr Mahinda said the company planned to invest an additional Sh600 million on IT systems in the coming months.
It is also strengthening its business network through a training institution to provide entrepreneurial training to small and medium sized enterprises. The institution , called Tusker Academy, is in partnership with Jomo Kenyatta University of Agriculture and Technology. The academy, to be run by the university through its JKUAT enterprises will train distributors and retailers.
"Improved business management skills translate to customer growth and enhanced consumer experience and ultimately more business for EABL" said Mr Mahinda.
He said post-election chaos following a disputed presidential election had interfered with the distribution and supply of products and that fuel transportation to plants in Uganda was interrupted in December, adding that this would slow down January and February sales.
EABL raised hopes that it will pick up the pieces and march on strongly into 2008 following last week's signing of a political power sharing deal.
between President Kibaki and opposition leader Raila Odinga aimed at defusing tension in the country.
"With the political settlement, growth will return in the last few months of the year," said Caldwell.
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