Companies

EABL’s net profit hits Sh10bn despite sharp dip in Tusker sales

Beer maker EABL’s net profit for the full year to June increased seven per cent to Sh10.3 billion, defying a 27 per cent drop in sales of its flagship brand, Tusker.

The brewer reported that cash from operations had increased by 32 per cent in the period to Sh27.9 billion as finance costs dropped by a fifth to Sh3.3 billion.

EABL’s revenue from its Kenya, Uganda and Tanzania business was up by between five and 16 per cent but this performance was negatively impacted by a slowdown in Juba.

“Unfortunately, as a result of the decline of our South Sudan business and negative foreign exchange impact, group net sales remained flat,” said EABL Thursday in a statement.

During a similar period last year, after-tax profits grew by 40 per cent to Sh9.6 billion, a jump occasioned by the sale of land at its Ruaraka headquarters and cost-cutting measures. Underlying profit at the time was up 16 per cent.

Revenue this year grew by three per cent to Sh66.4 billion. This increase was mainly due to a 134 per cent growth in the sales of Senator, according to a statement released by EABL’s parent company Diageo.

“Senator grew in Kenya following the roll back of the duty increase early in the year and momentum was sustained throughout the year,” said Diageo, which owns 50.02 per cent of EABL.

“This more than offset the decline in Tusker, which was impacted by the duty increase in Kenya and currency volatility in the markets.”

Tusker’s drop in sales is despite EABL management’s statement that the beer would be its “main focus” after it posted a one per cent growth in sales last year.

EABL launched 300ml and 330ml bottles for its Tusker and Pilsner beer brands, looking to spur consumption with a recommended retail price of Sh90 per bottle.

READ: EABL sells Ruaraka head office building for Sh675m

In the year to June 2015, revenue from Senator dropped by 20 per cent, as it continued a downward spiral that started in October 2013 after the government introduced a 50 per cent excise tax on the drink.

The law was amended in May last year, setting the excise tax cut at 90 per cent for beers manufactured using at least 75 per cent locally-sourced sorghum, millet or cassava — handing EABL a much-needed lifeline.

Mainstream spirits such as Kenya Cane and Kane Extra saw sales increase by high double digits in the full-year to June 2016 due to what Diageo said was “improved route to consumer” initiatives.

Reserve spirits (Ciroc and Singleton) also performed well due to “enhanced distribution and activation by brand ambassadors” while ready-to-drink brands — Smirnoff Ice Double Black and Guarana — were boosted by price increases, Diageo said.