EABL profit grows despite spend on Tanzania outfit

August 26, 2011
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, NAIROBI, Kenya, Aug 26 – Acquisition of a brewery in Tanzania in November has seen East African Breweries post a marginal two percent growth in its after tax profit.

On Friday, the beer maker reported that it has posted Sh9 billion in its 2011 full year results compared to the Sh8.8 billion posted a year earlier.

The results were influenced through a one-off-cost impairment through the acquisition of Tanzania’s Serengeti Breweries in November at Sh4.9 billion.

“The performance of Serengeti Breweries Limited was a one-off cost related to the integration to the business including the acquisition cost of the Moshi plant,” EABL Group Managing Director Seni Adetu told investors.

Mr Adetu said the addition of Serengeti Breweries to the EABL stable had added three operational brewery plants in Dar-es-Salaam, Mwanza and Moshi. The Group MD believes the investment makes the company better positioned to grow its sales within the East African region.

Despite operating in a challenging environment mainly due high inflation and stringent regulations in the alcoholic sector, the company’s turnover grew by 16 percent to Sh44.9 billion compared to the Sh38.7 billion a year earlier.

Mr Adetu puts this down to increased marketing spends on strengthening its key brands such as Tusker, Guinness and Bell as well as its distribution chain.

Going forward, EABL has plans to grow the spirits segment of its business with Mr Adetu observing it holds enormous potential to grow the firm’s bottom line.

Spirits lifted performance in Kenya with volumes up 78 percent and operating profits from the country division climbing 64 percent.

“We have to transform our participation in this space. We have to be as good in spirits just as we are in the beer market,” he said.

EABL, which is a unit of Diageo, the world’s biggest liquor maker, controls 95 percent of Kenya’s beer industry.

EABL has registered a unit in South Sudan, where it currently exports its products.

The company has also bought land and is determining whether to operate through a joint venture or on its own.

“South Sudan remains a key market for us,” he said. EABL’s market share in the nation could be as much as 70 percent,” Mr Adetu said.

EABL also saw recovery in Uganda during the second half where operating profits increased 69 percent. Kenya beer volumes were down just 1 percent on the Alcoholic Drinks Control Act, which came into effect midway through the financial year.

Overall, sales value rose 16.1 percent due to the introduction of new brands from Serengeti Breweries.

Capital expenditure during the year rose 200 percent to Sh9.7 billion for the year, which eroded most of the cash that the company had.

Whereas management remains cagey on the financing plans of the 20 percent Kenya Breweries Limited stake held by SAB Miller analysts project a rights issue as the most likely form of financing for the transaction.

The Board of Directors has recommended a final dividend of Sh6.25, which together with an interim dividend Sh2.50 brings the total dividend payout to Sh8.75 per share.

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