EABL half-year profit hits Sh7.7bn on land, bottle plant sale

EABL recorded strong growth of Senator Keg. PHOTO | FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• EABL’s net sales for the six months to December grew eight per cent to Sh37.5 billion, buoyed by low-cost beer Senator Keg whose volumes more than doubled following a lowering of excise tax mid-last year.
• The brewer booked a Sh2.2 billion profit from the sale of Central Glass Industries (CGI) to a South African glass-making firm and a further Sh707 million from sale of land at an undisclosed location.

The sale of land and a glass bottle manufacturing subsidiary has boosted East African Breweries Limited’s half-year net profit by over two-thirds to Sh7.7 billion, making up for currency losses at its South Sudan business.

EABL’s net sales for the six months to December grew eight per cent to Sh37.5 billion, buoyed by low-cost beer Senator Keg whose volumes more than doubled following a lowering of excise tax mid-last year.

The regional brewer booked a Sh2.2 billion profit from the sale of Central Glass Industries (CGI) to a South African glass-making firm and a further Sh707 million from sale of land at an undisclosed location.

Its profit-after-tax from continuing operations, absent the income from the asset disposal, increased 16 per to Sh5.5 billion, prompting the increase of its interim dividend by 50 cents to Sh2.

“The total profit for the half grew by 67 per cent…inclusive of the contribution from the disposal of CGI, the glass making subsidiary and netting off nearly Sh1 billion negative impact from South Sudanese pound currency devaluation,” the brewer said in a statement.

EABL, which is 50.02 per cent owned by multinational brewer Diageo, saw its net sales from the South Sudan business decrease 74 per cent, the Kenyan business grew 22 per cent while Uganda and Tanzania registered seven and 12 per cent drop in net sales respectively.

READ: EABL exits glass bottles business, eyes billions from subsidiary sale

Sales of mainstream beers, including Tusker, dropped by 10 per cent while premium beers such as Tusker Malt and Guinness grew by a similar margin.

The brewer recently launched a 300ml Tusker bottle targeting lower-income consumers seeking to increase sales of its flagship beer.

Its spirits brands like Kenya Cane, Uganda’s Waragi and Kane Extra reported net sales growth of 14 per cent while high-end brands like Ciroc and Singleton recorded strong growth of 45 per cent.

A key highlight of the brewer’s results is that its Senator Keg business seems to be rebounding, as the brew led other mainstream beer products to post a 106 per cent growth in sales.

“In East Africa, there was strong growth of Senator Keg, which more than doubled volume following the duty remission early in the fiscal year,” its London parent company Diageo noted in a statement.

Sales of Senator Keg — a low-cost beer manufactured using sorghum — dipped sharply after the introduction of a 50 per cent excise tax in October 2013, forcing EABL to close down thousands of retail outlets and fail to renew farmers’ contracts.

President Uhuru Kenyatta in May amended the law, setting the excise tax cut at 90 per cent for beers manufactured using at least 75 per cent locally-sourced sorghum, millet or cassava-- handing farmers and EABL a much-needed lifeline.

Senator Keg was the largest contributor to EABL’s overall growth.