East African Breweries Limited on Friday announced that after-tax profits for the half year declined by 11.33 per cent to Sh4.95 billion, compared to Sh5.59 billion year-on-year.
This was despite a 4.66 per cent increase in net revenue to Sh36.8 billion year-on-year. Dividends remain the same at Sh2 per share.
Announcing half-year profits, the company told a press conference that the prolonged electioneering period hurt the economy. And therefore politicking hurt purchasing power and lowered consumption of affordable, price-sensitive Senator Keg.
EABL officials also told a press conference that lower profits resulted from higher consumer prices and partial shutdown of its processing plant to expand capacity.
Still, the firm was upbeat.
“This is a solid set of results, delivered during drawn-out electioneering in Kenya, which impacted consumption especially in the value segment,” EABL managing director Andrew Cowan said.
The firm said that although sales of bottled beer and spirits had recovered significantly, Kenya’s volume performance for keg was down 22 per cent.
The price of a 300ml serving of Senator Keg is currently Sh30, in April it was Sh25 per serving. “This is a very price-sensitive brand so we saw a decline in demand we were just starting to recover from,” Kenya Breweries managing director Jane Karuku said.
INCREASED INVESTMENTS
“Then we had a prolonged electioneering period that unfortunately affected the majority of Senator consumers.”
The firm’s innovation contribution went up to 21 per cent during the period, adding Sh7.6 billion to revenue across East Africa. It was driven mainly by new brands such as Tusker Cider, Serengeti Lite, Uganda Waragi Coconut and Chrome Vodka.
MD Cowan said reduced profits also resulted from increased investment in sales and advertising, accelerated capital investment and excise-tax changes in Uganda. “Increased investment behind our brands in sales and advertising underlines our bold strategy to pursue existing and emerging growth in all segments of business,” he said.
The firm says Sh5 billion investment in capacity expansion for spirits and Senator Keg production over the period positions the company for the future.
Construction of the Sh15 billion brewery in Kisumu is proceeding as planned. The company is using Sh12.5 billion from its free cash flow. “The Sh2.5 billion balance is from a loan secured from Stanbic Bank in Kenya and their parent company,” EABL group finance and strategy director Gyuri Geiszl said.