5 September 2012

Kenya: SABMiller to Disrupt EABL Market - Analysts

The re-entry of SABMiller into the Kenyan market will spoil the party for East Africa Breweries Limited which recently reported double digits billion profits. Analysts at Standard Investment Bank say things have been shifting for EABL even as South African brewer keeps a low profile ahead of its expected re-entry.

The financial analysts, in its EABL stock valuation update said the company can however cover up for the lost market share with expansion to the neighboring markets and also spirits growth. "We remain cognizant of potential disruption of the core Kenyan market by SABMiller which has so far maintained a low profile ahead of its expected re-entry," said the SIB analysis.

EABL recently concluded a purchase of a 20 per cent non controlling interest in its subsidiary Kenya Breweries Limited from SAB Miller but it also had to dispose stake in Tanzania Breweries limited. "We also see the chance of EABL being nominated to exercise the 49 per call option that Diageo has on the remainder stake in Serengeti having been diminished,"

The company reported a 44.6 per cent jump in annual net profits attributable to 10.6bn. Standard Investment experts said costs of raw material may also affect the brewer earnings.

"We don't think barley substitution will be big in the near term, and actually expect domestic supplies of cereals to remain erratic at best with prices increasing,"said the statement.

The analysts do not expect dividends payout to exceed 80 per over its investment horizon as EABL pays down debt and is also expected to borrow more in the near term.

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