NAIROBI, Kenya, Jan 27 – East Africa Breweries Limited (EABL) made Sh5.6 billion profit after tax, in its half ending December 31, 2016 – a 2 percent increase from the previous year.
The results were buoyed by Uganda’s net sales which went up by 7 percent while Kenya recorded flat growth and Tanzania recorded a -7% percent decline.
EABL Chairman Charles Muchene says the period was marred by a tough external business environment as taxes continued to bite hard in their revenues.
“The over 43 percent tax in beers has seen consumers unable to afford the products; the government went too far with this regulation,” He stated in a press conference on Friday.
Beer sales declined in the period under review by 13 per cent while Ready to Drink went down by 11 percent.
On the other hand, spirits experienced huge growth, with mainstream spirits growing by 31 percent while premium spirits went up by 7 percent. Emerging markets went up by 8 percent.
In Kenya, beer sales declined by 0.3 percent while Uganda’s beer sales went up by 7 percent. Senator Keg sales went up 21 percent in the period under review.
“Positive impact of Senator Keg and spirits in Kenya could not fully offset bottled beer decline, foreign exchange and downtrading in Tanzania and South Sudan was also a huge negative,” said EABL Managing Director Andrew Cowan added.
Cowan was, however, quick to talk about the uniqueness of the Kenyan market that contributes 74 percent of overall sales terming it as a demanding market.
“Kenyan market is dynamic, curious, paced. I was in Diageo before I came here, but I haven’t seen a market like Kenya,” he noted.
Capital expenditure for the period was Sh1.8 billion, a growth of 14 percent from last year spent on increasing capacity, improving efficiency, quality and safety of our operations thereby reflecting our confidence in the future of the business.
“We will continue to invest building capacity, people, brands and innovation to ensure they tap in to existing, emerging and changing consumer needs,” he noted.
The Board of Directors recommended an interim dividend of Sh2 per share remaining unchanged from last year.
Standard Investment Bank analysts foresee a higher marketing spend in the second half on launch of new products and to boost mainstream beer performance.
“We are however impressed by the cost control measures. We are optimistic margins will remain stable owing to increase in spirit sales and roll-out of new products,” says SIB.