EABL profit jumps to Sh8.5 billion

East African Breweries Limited (EABL) has announced improved financial results for the period ended June 2017, reporting Ksh 8.5 billion in profit-after-tax from continuing operations, which represents 6 percent growth compared to last year.

The Group’s net sales were up 2% and volumes grew by 5% driven by good performance in mainstream spirits and value beer, with both delivering double-digit growth.

Despite the combined effects of excise-tax incidence and drought-related inflation – which respectively made EABL products less affordable and impacted on consumers’ disposable incomes – net sales in Kenya, EABL’s largest market, were up 4%. In Uganda net sales grew by 7% while Tanzania’s declined by 12%.

EABL’s spirits business grew by 14% during the year, driven by Kenya Cane and Johnnie Walker, which grew at 46% and 17% respectively. Uganda Waragi also grew by 23%.

Across East Africa, the Group’s beer business saw mainstream and premium segments shrinking by 6% and 8% respectively.

This was, however, mitigated by a better performance in the value beer, growing by 7%, driven by Senator and Balozi.

The contribution from our innovations rose 15% compared to last year, adding Ksh19 billion to the total revenue across East Africa.

Key innovations introduced during the period included Tusker Cider, Pilsner 7, and Smirnoff Electric Ginseng. Other innovations included Jebel gin variants in Kenya, Ngule in Uganda and Serengeti Lite in Tanzania.

Growth in profits from continued operations was achieved through better efficiencies across the Group. Savings of Kshs 2.3 billion were delivered in the supply chain in the areas of sourcing, logistics and through operational efficiencies, automation and standardisation in manufacturing.

Net finance costs also reduced by 3% driven by lower borrowings due to improved liquidity.

The Group’s capital expenditure (CAPEX) rose by 14% to Ksh 5.7 billion as EABL continued to invest in production capacity for beer and spirits and increasing quality and environmental efficiencies of its operations.

EABL restructured its balance sheet, strengthening the company’s financial position in the year under review, after the issuance of a Ksh 6 billion Medium-Term Note at the Nairobi Securities Exchange in March 2017.

EABL Group Managing Director Andrew Cowan has said the business performed well considering the difficult trading environment.

“We demonstrated resilience delivering this solid set of financial results despite challenging times, mainly characterised by inflationary pressures and regulatory volatility. We have a clear strategy anchored on incremental investments to unlock growth in areas such as spirits and value beer as well as extending our cost management agenda,” Cowan says.

EABL’s recent and planned investments have set the stage for improved performance in future. The company announced a Ksh 15 billion investment in Kisumu brewery last month, aimed at increasing production capacity for Senator in the next two years.

The Kisumu brewery is expected to bring significant multiplier effect, potentially creating 110,000 jobs across the value chain – including sorghum farmers, as well as Senator distributors and retailers.

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Going forward, the EABL management is encouraged by trends in the second half of the year in Kenya, during which the business saw better performance in premium and mainstream beer.

In Tanzania, the company made a settlement with The Fair Competition Commission after several years on uncertainty and the business is back in growth in the fourth quarter.

The Board of Directors has recommended a final dividend of Ksh 5.50 per share. The 2017 annual dividend remains unchanged from last year at Ksh7.50 per share.

Source: Capital FM