Land sale, cost cutting lift EABL net profit to Sh9.6bn

The sale of land and cost-cutting measures helped lift East Africa Breweries Limited’s (EABL) full-year profit 40 per cent to Sh9.6 billion, the beer maker’s financial statements have showed.

The brewer has booked a gain of Sh1.8 billion from the sale of 15 acres of land (out of 60 acres of idle land it owns in its Ruaraka headquarters) to an undisclosed party, boosting its earnings.

Administrative expenses decreased by Sh1.5 billion to Sh9.3 billion as the company reaped the benefits of a restructuring conducted last year, which saw 100 employees get laid off.

The gains from land sale and expenditure cuts were critical for EABL especially after a marginal increase in sales of its mainstream beer, Tusker and emerging brand Balozi in Kenya as well as Serengeti beer in Tanzania.

“We currently own about 60 acres of undeveloped land at Ruaraka and think we need to hold about half of that for future capacity expansion,” said the EABL chief executive officer Charles Ireland in an interview shortly after announcing EABL’s results on Friday.

“The balance of that acreage will never be used and that is why we decided to dispose 15 acres in the last financial year. Another 10 acres or so will be disposed this financial year.”

In 2012 EABL sold 32 acres of land to London-based private equity fund Actis on which it is building the multibillion-shilling Garden City Mall.

The brewer last year spent Sh1.18 billion in restructuring its business, seeking to realign its cost structure to a sharp revenue dip from Senator Keg following the introduction of a higher rate of excise tax.

Costs like office supplies dropped by Sh771 million to Sh2 billion but staff expenses increased 8.5 per cent to Sh5.15 billion.

“The benefits of restructuring as well as measures taken to manage the cost of sales are starting to come through for the business,” said Tracy Barnes, EABL finance director.

READ: Higher sales drive East African Breweries’ after tax profit up 40pc

The beer and spirits maker said its revenue rose to Sh64.42 billion from Sh60.75 billion the previous year. Revenue generated by its mainstay Kenyan business grew by three per cent.

EABL said this growth would have been six per cent were it not for the slow growth of Senator Keg.

Growth of the low-end beer is, however, expected to pickup in the current financial year after the government revised excise duty payable to a remission (rebate) of 90 per cent.

Tanzania’s revenue grew by two per cent as the company experienced slowed performance by its flagship beer brand Serengeti while Uganda revenue grew by seven per cent.

“Our mainstream beers were challenged hence the softening in revenues this year. In the current financial year, Tusker will remain our main focus,” said Jane Karuku, the managing director of Kenya Breweries Limited.

Reserve spirits (Ciroc and Singleton) as well as ready-to-drink brands (Smirnoff Ice Double Black with Guarana and Snapp), however, boosted the brewer, growing 71 and 70 per cent respectively.

Sales of premium sprits like the Johnnie Walker brand grew by 31 per cent while emerging sprits such as Jebel Gold grew by 32 per cent.

The brewer recently paid its parent company Sh2.8 billion to offset an outstanding $200 million five-year loan as its financing costs for the year decreased four per cent to Sh4 billion.

Its total borrowings stand at S3.7 billion, a decrease from S6.6 billion the previous year.