E.A Breweries

EABL: FY2009 Profit Down 5%

East African Breweries has announced that their FY2009 net profit declined by 5%. The local brewer reported a net profit of KES 7.1 billion for the Financial year ending June 30, 2009 compared to KES 7.5 billion reported in FY2008. Net revenue increased by 6% from KES 32 billion in FY2008 to KES34 billion in FY2009. The company’s administrative expenses remained stable at KES3.8 bilion.

COMPANY STATEMENT
EABL’s new Group Managing Director, Seni Adetu stated that the business had performed remarkably well given the tough operating environment in the region with generally low consumer demand. This coupled with the two substantial tax increases in Kenya affected the ability of consumers to access its brands. Growth was however seen in Uganda, Tanzania and Sudan.

In Kenya, tax in the spirits category went up by 250% with an additional increase of 70% on non-malted beers. Mr. Adetu expressed fears that these increases may lead to the mushrooming of cheap and illicit alcohol. “However, in the 2009/2010 budget, the Government stated its intention to reduce the significant tax burden on the spirits sector to make legitimate alcoholic drinks more affordable to consumers, said Adetu. He further revealed that the growth in its Uganda business and exports into the region helped to compensate for the effects of these increases.

Rising input and energy costs as well as the global economic crisis led to an increase of 14% in costs of sales from Kshs 15 billion to Kshs 17 billion. To mitigate against this cost increase, management put in place measures to contain operating costs, showing a flat year on year performance. As a result, this led to an underlying profit growth before reorganization of 1% against 2008 to Kshs 11 billion. EABL recently reorganized the business to improve efficiency in a challenging economic environment.  The cost of the re-organization was a one-off Kshs 558 million. This led to a pre tax profit of approx. Kshs. 12 Billion in 2009 compared to Kshs 12.3 Billion in 2008, a marginal decline of  3% over the last financial year.

The EABL Group consists of Kenya Breweries, Uganda Breweries, International Distillers Uganda, East African Maltings, Central Glass Industries, EABLI and UDV Kenya.

Investments:
EABL made investments of Kshs 2.5 billion in additional capital investments to improve capacity and quality at its plants in Nairobi and Kampala. EABL is optimistic this will improve the Group’s ability to grow in future.

Dividend:
EABL directors have recommended a final dividend of KShs 5.55 per share. This in addition to KShs 2.50 interim dividend paid early in the year will total to KShs 8.05 per share. Total dividend payment for the year will be KShs 6.4 Billion. This amount is similar to last year.

Community Investment:
The EABL Foundation has continued to enrich the lives of East Africans in the past year.

EABL Foundation maintains its mandate to reach as many communities as possible. The Foundation has continued with the initiative of providing water and sanitation services to over 515,000 people. Last week Deputy Prime Minister, Musalia Mudavadi commissioned one of the blocks in Machakos town. Other projects across the country will be commissioned within the next few weeks.

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