East African Breweries profits increase
Nairobi, Kenya
Kenya’s East African Breweries Ltd (EABL) increased sales of spirits in its first half ended December and sees the momentum continuing into the second half, its chief executive said on Friday. Majority held by Britain’s Diageo, the world’s largest drinks group, EABL said double-digit growth in spirits and the introduction of wine resulted in 12 percent volume growth. The brewer, which sells Johnnie Walker and leads in the beer market with brands such as Tusker and Pilsner, did not include any income from Tanzania in the results because it has just finished an acquisition there. “On an organic basis, the momentum we have seen in the first-half should continue in the second-half. On a net sales value basis, operating profit basis, we should expect to deliver double-digit growth,” Seni Adetu told reporters. First-half pretax profit rose 3 percent to 6.17 billion shillings while operating profit jumped by 14 percent to 6.1 billion due to improved cost management, the company said. EABL shares slid by 1 percent in the afternoon to 188 shillings, after being unchanged for most of the day. The group’s full-year outlook depends on the implementation of an alcohol control law in Kenya and the resolution of capacity and supply bottlenecks in Uganda, Adetu added. The alcohol control act, which came into force in the Kenyan market late last year, restricts operating hours for bars and nightspots, curbs hitherto unrestrained sale of alcohol in outlets like supermarkets and imposes heavy fines for offenders. Adetu said the impact of the law was not yet clear but he expected the long-term impact to be minimal. While sales in Uganda rose in the six month period, operating profit there declined on the back of the constraints experienced there. “We have got to step up our game in Uganda,” Adetu said. EABL is investing 4 billion shillings in the Ugandan market over this financial year and the next, starting with a packaging line that was installed last November. “We expect to see the benefits of that coming through in the second half,” Adetu said. nalysts said they expect the company to have an exceptional full year, mainly due to a one-off gain from the sale of its 20 percent stake in Tanzania Breweries Ltd. “We are quite bullish on the share. The recent acquisition of Serengeti could offset any potential losses. Because of the sale of TBL, I would say their PBT growth could be higher than the average of the last five years,” said Siongo Kisoso, a research analyst at Genghis Capital. “I would rank that (expected full year growth) at 20 to 30 percent but only because of the sale of Tanzania Breweries.” EABL completed the acquisition of a 51 percent stake in Serengeti Breweries late last year in a $60 million transaction that allowed it to extricate itself from an uneasy partnership with SABMiller, which owns TBL.
