EABL posts Sh7bn profit

August 28, 2009
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, NAIROBI, Kenya, Aug 28 – East African Breweries Limited (EABL) has announced a net profit of Sh7.18 billion for the year ended June 2009.

Net turnover for the brewer which operates in Kenya, Uganda and Tanzania went up by six percent to Sh34.4 billion, but the costs of barley and energy which went up by between 20 and 50 percent drove the operating costs to Sh17 billion.

“The results that we have got are commendable especially given the circumstances that businesses operated in during the year,” said the new Group Managing Director Seni Adetu, while pointing to the environment which was characterised by high taxes, slow economic growth and increased costs of raw materials.

In Kenya for instance, tax on non-malted beer increased by 70 percent while that on spirits went up by 250 percent, translating to a 33 percent drop in (spirits) consumption.

The company’s bottom line was also affected by its decision to spend Sh558 million in restructuring its business to improve efficiency.

However, the board has recommended a final dividend of Sh5.55 per share bringing the total payout for the year to Sh8.05 per share.

Mr Adetu told an investor briefing on Friday that they would put in place strategies that would enable them maintain a competitive edge as well as grow their business and maintain their position as market leader.

Investing in Kenya, Uganda and the Great Lakes countries such as Rwanda, Burundi and Sudan would ensure they are stronghold in these markets, he explained.

The MD said discussions with the Kenyan government would continue to prevail upon them to reduce taxes in order to encourage more people to consume their products as opposed to the cheap and illicit alcohol that many turn to when they can’t afford the legitimate drinks.

If the tax regime continues to be high, the beer manufacturer hinted that it could be forced to increase prices on some of its brands.

“Because of the challenges on the cost side, we have to consider what options we have and so we will consider certain price increases. However, we will also consider what impact that will have on the consumer before we take such price increases,” he said.

Industrialist Chris Kirubi concurred with the MD saying every decision that companies make must take into effect the impact on the end consumer, who are particularly vulnerable in these harsh economic times.

“We all must look at the ‘mwananchi’, how does he improved his standards of living, how does he create wealth?” he posed.

Mr Kirubi also revised the issue of illicit trade, which he said needed to be addressed urgently as it was stifling growth in Kenya and her neighbouring countries.

“Governments need to bring down taxes so as to help people to pay taxes,” he stated.

On the controversial issue of their acquisition of a stake in Tanzanian’s Serengeti Breweries Limited (SBL), Mr Adetu said that those plans were still on despite an injunction that seeks to stop the deal.

South African Breweries Miller (SABMiller) went to court seeking an order to stop EABL from purchasing a stake in the SBL citing a breach of contract which the two giants signed seven years ago.

The 2002-deal saw SABMiller agree to sell 20 percent of TBL to EABL in exchange of a similar stake in Kenya Breweries and it also meant that TBL would manufacture and sell EABL brands in Tanzania.

The row however erupted after EABL made know its decision to terminate its existing brewing and distribution agreement with TBL, but the court has order the two parties to reach a compromise by 2011.

“We expect that through arbitration this will come much earlier because we have as strong case of a breach against the current partners in that country. But we are confident that the Serengeti deal will go ahead,” Mr Adetu said, adding that SBL was strategic to their operations in Tanzania.

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