EABL posts Sh12 billion pre-tax earnings

 BY JOHN NJIRAINI

Beverage manufacturer, East Africa Breweries Limited (EABL), has maintained its profitability level in a year that the management described as “challenging and characterised by several shocks”.

The group yesterday announced that profit before tax for the full year ending June 30, remained slightly shy by three per cent to stand at Sh12.2 billion, down from Sh12.5 billion recorded the same period last year.

Group Managing Director Seni Adetu said the performance was a result of inorganic growth after incorporating the contribution of Serengeti Breweries Limited (SBL) in Tanzania, where the Group completed  acquisition of a 51 per cent stake in November last year at a cost of Sh4.9 billion.

“SBL has diluted our income, but we see this as a one-off,” he said, adding that EABL spent Sh300 million to integrate and upgrade SBL operations into the group’s fold.

 

Economic shocks

During the year, turnover grew by 16 per cent to Sh44.8 billion compared to Sh38.7 billion recorded the previous year, mainly driven by significant growth in its spirits business that recorded a 56 per cent growth.

The beer segment, however, remained subdued particular in its key Kenyan market where flagship brands like Tusker, Pilsner and Guinness recorded marginal growth.

Adetu attributed the suppressed growth to a challenging year that was characterized by numerous shocks like rising cost of fuel, drought, rising inflation, rising interest rates and weak shilling, all of which impacted directly on consumers disposable income.

The tough environment was compounded by increasing competition in the region and tightening regulation, particularly in Kenya where the impacts of the Alcohol Drinks Control Act were starting to be felt and in Uganda where the Government banned sell of alcohol in sachets.

“We are concerned about the alcohol law and we think Kenya is becoming over-regulated. The regulations tend to slow us down but our business is agile,” said Seni during an investor briefing.

Despite the challenges, Seni said EABL, which is majority owned by Diageo, is committed to increase its presence in the region, even as competition for control of different markets intensifies.

During the year, EABL invested Sh4.5 billion in a new packaging line in Uganda, a water storage facility in Kenya and completed a new brewery in Tanzania.

The company has also registered a new subsidiary in South Sudan and acquired land for a possible plant, while in Ethiopia it is hoping to ride on Diageo’s bidding for Meta Abo Brewery, which is being sold by the Ethiopian Government.

The company recommended an interim of dividend of Sh2.50 per share.