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EABL maintains profit margins

NAIROBI, Kenya, Feb 18 – East African Breweries Limited (EABL) posted Sh4.15 billion in after tax profit for the first six months of the year to December 31, 2010.

Although the brewer\’s volume increased by 12 percent driven largely by a strong performance in spirits, the profit remained flat compared to the Sh4.2 billion registered in the corresponding period in 2009.

Group Finance Director Peter Ndegwa explained that profit from their Ugandan operation declined while that from the Great Lakes Region remained at the same level.

“In Kenya, our Net Sales Value (NSV), which includes all our businesses in Kenya grew by 14 percent and our operating profits increased by 23 percent. In Uganda, we continue to face a tough environment, however we still grew our NSV by five percent,” said Mr Ndegwa.

Turnover grew by 10 percent to Sh20.5 billion over 2009’s Sh18.6 billion. The company\’s board of directors approved an interim dividend of 2.50 per share.

The Ugandan operation did not also yield much as the Group focused on replacing ageing equipment with new ones. A total of Sh1.8 billion was invested during the period and a similar amount will be pumped in the second half.

EABL did not also factor in accounts from their Tanzanian market following its acquisition of a majority stake in Serengeti Breweries in a deal worth Sh4.8 billion ($60.4 million).

Following this acquisition, EABL ended a brewing and distribution agreement with Tanzania Breweries Limited, where it held a 20 percent stake which in effect means an end to a contract that the firm had with South African Breweries Miller (SABMiller).

 This transaction has been a contentious one and the brewer’s intention to sell off its shareholding has dragged on for sometimes now.

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EABL Group Managing Director Seni Adetu said discussions with the Tanzanian authorities to work out how best to dispose off its shares in Tanzania Breweries Limited were still on going.

Although the first half was characterised by a recovering economy in all the East African markets, steady cereals and energy costs which saw the company improve on its cost management, the beer manufacturer expressed confidence that second half would produce even better results.

Mr Adetu cited their investments in Uganda which are likely to pay off in the second half, the successful referendum in Southern Sudan which will open doors to the distribution of more of their brands as well as increased economic activities as some of the factors that likely to drive improved performance.

“The momentum that we have seen in the first half will continue in the second half. We should expect to deliver double digit growth,” he enthused although he acknowledged that the political environment and high fuel costs still pose a risk to this growth.

Serengeti acquisition which will bring on board Serengeti Lager is expected to complement EABL’s existing brand portfolio and deepen its footprint in the Tanzanian market.

Locally, there’s a drive to increase the consumption of spirits as the company moves to take advantage of the tax relief in this class of alcoholic drinks.

The management is also optimistic that the recently enacted Alcoholic Drinks Control Act will not impact negatively on their business even in the long term.

“We will continue to remain self-regulated irrespective of what the alcohol act says. What that means is that our standards for responsible drinking, campaigns and partnership with government are continue to be high,” the Group MD said.

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