16 February 2013

Kenya: High Costs See EABL Profits Dip 14 Percent

GIANT beer and spirits maker East African Breweries posted a 14 per cent drop in net profits in its half year profits due to high financing and distribution and raw material procurement costs, the brewer said yesterday.

EABL, the maker of popular brands such as Tusker, Guinness and Johnnie Walker, said net profits dipped to Sh3.7 billion, down from Sh4.4 billion in the first half of 2011.

The firm said finance costs rose by 221 per cent to stand at Sh2.1 billion, up from Sh600 million driven by its acquisition of a 20 per cent stake of the Kenya Breweries stake in Tanzania Breweries last year. EABL borrowed Sh19 billion for this purpose.

Selling and distribution costs rose 10 per cent to Sh2.5 billion, up from Sh2.3 billion. But revenues grew by 10 per cent to hit Sh27.7 billion driven by good performance in some beer categories and premium spirits which posted a 45 per cent growht.

Sales grew in Kenya, Tanzania and emerging markets such as Rwanda and Burundi but slowed in Uganda due to harsh economic situation there.

"Despite a softening consumer economy in Uganda and a duty-rise that slowed beverage alcohol market in Tanzania, we managed to deliver good results driven by our total beer portfolio that grew revenue by 11 per cent while spirits grew by 9 per cent across the region," said EABL's Group MD Devlin Hainsworth during an investor briefing.

EABL said it plans to procure more raw materials such as sorghum and barley from the local market to reduce some of the costs. The company said it is investing some Sh4 billion in Kenya this year to expand its bottling lines as well as distribution.

Focus will remain on promoting the use of spirits, EABL said. "We really are creating a spirits transformation in the region," said Hainsworth.

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