East African Breweries Limited (EABL) has reported 5% revenue growth for the year ending June 2018, as performance significantly improved in the second half with net sales up 10%.
EABL’s spirits net sales increased 8% in the full year, driven by a strong performance of the mainstream spirits portfolio (up 23%) while beer increased 4%, fueled by growth of bottled beer and partially offset by decline of Senator keg sales. Innovation delivered good performance – contributing 22% to EABL’s net sales – with brands like Serengeti Lite in Tanzania, Tusker Cider in Kenya and Uganda Waragi flavours in Uganda. These results reflect the diversity of the geographical and category performance across East Africa.
Gross margin improved by 4% as productivity savings and positive mix more than offset inflation on cost of sales. EABL continued to invest behind our brands with marketing spend up 19%, ahead of net sales growth to rejuvenate bottled beer, drive innovation and improve Senator keg’s performance.
Full-year profit from operations was up by 4% excluding the impact of provisions made for pending tax claims. In the second half of the year gross margin improved by 1.3 percentage points (ppts) and underlying operating margin by 0.7ppts. Profit after tax declined by 15% as a result of the one-off tax provisions. Overall strong underlying performance with robust cash flow delivery ensured the necessary funding for the higher investment in the period.
EABL Group Managing Director, Andrew Cowan, said: “In the year we have continued to make progress on our performance ambition as we increased investments behind brands, capital expenditure and capability to sustain future growth momentum. In the year, we have spent Kshs 13 billion in capital expenditure with Ksh 7.8 billion of that being spent on the Kisumu brewery. All these efforts have supported the results with Kenya, Uganda and Tanzania growing at 1%, 4% and 41% respectively.”
The company’s investments in the year reinforce key pillars of EABL’s 2022 growth strategy and have started yielding returns, with greater focus now on scaling up brands growth, in line with emerging trends.
The Kisumu brewery is set to be commissioned later this year, spawning a vibrant agricultural value chain in Western Kenya and potentially setting the stage for creation of over 100,000 direct and indirect jobs. EABL has already contracted over 15,000 farmers to supply the new brewery with sorghum for production of the low-priced Senator brand, enabling EABL to leverage opportunities to recruit consumers from the illicit alcohol market.
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The Board of Directors has recommended a final dividend of Ksh 5.50 per share. The 2018 annual
dividend will stand at Ksh 7.50 per share.
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