EABL records 9pc sales growth on uptake of spirits

Corporate News

EABL employees work at the Ruaraka plant in Nairobi. PHOTO | FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• Earnings were primarily boosted by a 60 per cent net sales increase of its Johnnie Walker range of spirits as well as a double-digit growth of the Guinness brand.
• Tusker’s net sales grew by three per cent while Senator, which was slapped with a 50 per cent increase in excise tax, saw its sales drop 16 per cent —maintaining its one-and-a-half year losing streak.       
• Stakeholders will be looking to see how the improved net sales announced by Diageo Thursday (nine per cent compared to four per cent in 2014) will impact the brewer’s bottom line.

Beer maker EABL recorded a nine per cent growth in net sales for the full year to June, a statement released by the UK parent company Diageo showed Thursday.

This means that the brewer’s turnover soared to about Sh66.8 billion compared to the Sh61.29 billion reported during the financial year ended June 2014.

East African Breweries Limited’s full-year earnings were primarily boosted by a 60 per cent net sales increase of its Johnnie Walker range of spirits as well as a double-digit growth of the Guinness brand.

The brewer is expected to officially release its financials Friday, but the numbers published by its parent company offer an advance glimpse into its performance.

The company has to get approval of the Capital Markets Authority and notify the Nairobi Securities Exchange before releasing its detailed financial statements.

“In East Africa, where net sales grew nine per cent, Guinness volume and net sales grew strong double-digits supported by the “Made of More” campaign,” Diageo said in a statement.

“In spirits, growth was led by mainstream spirits brands and good performances from Johnnie Walker and Smirnoff. Success in mainstream spirits was driven by Kane Extra and Liberty in Kenya.”

Tusker’s net sales grew by three per cent while Senator, which was slapped with a 50 per cent increase in excise tax, saw its sales drop 16 per cent —maintaining its one-and-a-half year losing streak.         

Senator Keg’s contribution to EABL’s sales at its peak was over 10 per cent, but this has since dropped sharply with Charles Ireland, the brewer’s CEO, recently describing its current sales as negligible.

It is however expected to improve in the current financial year after KRA raised tax remission (rebate) for the low-end brand to 90 per cent.

Diageo added that its relatively new beer brands — Kenya’s Balozi lager Kibo Gold in Tanzania — targeted at the lower end of the market helped “offset a decline in Senator due to excise duty changes in Kenya.”

The ready-to-drink Smirnoff Ice Double Black and Guarana, which was launched locally one year ago, also contributed to the growth.

In the half-year ended December, EABL announced an 11 per cent net profit growth to Sh4.6 billion as sales rose faster than costs.

Sales increased 9.1 per cent to Sh34.7 billion —driven by fast growth of the brewer’s flagship Tusker brand — while the cost of goods sold jumped 9.4 per cent to Sh17.6 billion.

Administrative expenses declined 2.4 per cent to Sh4.3 billion, reflecting the firm’s cost savings from a mix of retrenchments and realignment of its manufacturing and distribution network

Stakeholders will be looking to see how the improved net sales announced by Diageo Thursday (nine per cent compared to four per cent in 2014) will impact the brewer’s bottom line.

In the full year ended June 2014, the brewer posted an after-tax profit of Sh6.85 billion, representing an increase of five per cent from the previous year’s Sh6.52 billion.

The brewer’s sales at the time grew four per cent to Sh61.29 billion on the back of a strong performance by Tusker, Guinness, Serengeti Premium Lager as well as Bell.

Kenya remained the group’s biggest market contributing 64 per cent of the total sales while Uganda and Tanzania came in second and third respectively at 18 per cent and 11 per cent.