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
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.
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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