Extended poll period, higher costs cause 11pc dip in EABL net earnings

East African Breweries Limited plant in Ruaraka, Nairobi. Extended Kenya election period and higher costs have caused 11pc dip in the brewer's net earnings. PHOTO FILE | NATION 

In Summary

• Extended electioneering period, higher sales and advertising costs further ate into its top-line.
• The brewer cost of sales increased by Ksh2.23 billion ($21.7 million) to Ksh20.8 billion ($203.2 million) while other costs also went 1.4 per cent up.
• Mainstream beers have in recent years come under pressure from excise tax increases, with the resultant higher retail prices pulling sales.

By BUSINESS DAILY
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East African Breweries Limited (EABL) after-tax profit for the six months to December dipped 11.3 per cent to Ksh4.95 billion ($48.4 million) following a weak performance by the Kenyan market and higher costs.

The regional brewer’s revenues improved 4.7 per cent to close the half-year at Ksh36.8 billion ($359.5 million), driven by its bottled beer business in Kenya and Tanzania and the spirits segment.

EABL’s beer business were however pulled back by a depressed performance in Kenya (extended electioneering) and Uganda (higher excise tax) while higher sales and advertising costs further ate into its top-line.

“It is encouraging that bottled beer is in recovery and mainstream spirits continues to grow strongly,” Andrew Cowan, EABL’s managing director, said in a statement.

“Our increased investment behind our brands in sales and advertising underlines our bold strategy to pursue existing and emerging growth in all segments of our business.”

The brewer cost of sales increased by Ksh2.23 billion ($21.7 million) to Ksh20.8 billion ($203.2 million) while other costs also went 1.4 per cent to Ksh8.7 billion ($84.9 million) as the brewer rolled out more campaigns to spur consumption.

READ: Battle for EA alcohol market shifts to spirits, low-end brands

Keg

EABL’s parent firm Diageo Thursday further disclosed that Tusker sales increased one per cent while Guinness improved three per cent, bucking recent trends, while Senator Keg sales dipped.

Mainstream beers have in recent years come under pressure from excise tax increases, with the resultant higher retail prices pulling sales.

The brewer has in response revved up its innovation unit (occasioning the launch of brands like Kenya Cane Coconut, Uganda Waragi Coconut, Chrome Vodka and Tusker Cider) and increased its investment in spirits.

These new brands added Ksh7.6 billion ($74.3 million) to the total revenue in the period under review, EABL said.

“We have refreshed our focus around our marketing strategy, expanding our route to consumer to broaden the reach of our products across markets whilst innovating at scale,” Mr Cowan said.

Senator Keg has also been a point of focus by the brewer with a plans to build a Ksh15 billion ($146.6 million) factory in Kisumu to boost production.

In the period under review, the brewer spent Ksh5 billion ($48.9 million) in capital expenditure to boost the manufacturing capacity of spirits and value beer.

Despite the drop in profitability, the brewer’s board retained the proposed interim dividend at Ksh2 ($0.02) per share.

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