East African Breweries Limited (EABL) has posted a 40 percent rise in net profit to Sh9.57billion in 2015 from Sh6.84billion recorded in 2014 attributable to strong performance in the premium beer and double digit growth in spirits.
The growth was also attributed to cost containment as administrative expenses reduced by 16 percent during the period under review benefiting from last year’s re-organisation as well as savings from improved raw material usage, low heavy fuel prices and greater production efficiencies.
Export market net sales grew by 48 percent despite currency challenges that saw the firm suffer Sh900million in currency exchange losses as East Africa currencies weakened against the dollar.
“Net sales in Uganda grew by seven percent with growth in Uganda Waragi and continued momentum in Guinness after pack change and media campaign. However, a weakening Uganda Shilling against the Kenya Shilling reduced the growth to four percent upon translation,” the firm said.
Tanzania net sales grew by two percent but dropped by two percent upon translation owing to a weakening Tanzania shilling against the Kenya Shilling.
“Excluding Senator Keg EABL Kenya sales volume increased by six percent if Senator is factored in sales grew by three percent,” the management said.
The firm is however set to benefit from the Alcoholic Drinks Control 2015 Act that set the excise tax cut (remission) at 90 percent from the current 50 percent for beers manufactured using at least 75 per cent locally-sourced sorghum, millet or cassava.
Sales of Senator Keg — an EABL low-cost beer manufactured using sorghum — dipped sharply after introduction of a 50 percent excise tax in October 2013 that led to a doubling of prices as low-end consumers dropped the beer.
Total group borrowing decreased by Sh2.8 billion due to reductions on short term borrowings and a part payment of the long term intercompany loan from Diego.
Net capital expenditure stood at Sh4.9 billion while selling and distribution went up by 5 percent compared to last year.
The board of directors has recommended a final dividend of Sh6.00 per share.
During the period under review, the firm sold one of its subsidiaries, Central Glass Industries Limited (CGIL), to South Africa’s Consol Glass Proprietary at Sh4.5 billion with proceeds from the sale used to reduce existing debt and in investing in its core beverage business.
The sale also included a Framework Supply Agreement which will ensure continuity of supply of glass bottles to EABL and its group for a term of five years and in which Consol Glass Proprietary has agreed to pay EABL a success fee of Sh420 million.
EABL has also agreed to provide certain management and general assistance services to Central Glass Industries Limited at Sh200 million for an initial period of two months after completion, and a monthly fee of a Sh100 million for additional services to be provided for twelve months following completion.