EABL manages a pre-tax profit of Sh10.6b despite tax increase
Milliam Murigi @millymur1
Despite increases in alcoholic beverage taxes, East African Breweries Limited (EABL) managed a pre-tax profit of sh10.6 billion during the half-year ending 31 December 2019.
This represents a nine percent increase compared to the same period last year. Profit after tax also grew at the same rate, to sh 7.2 billion during the period under review.
Net sales were up by 10 percent to sh 45.9 billion, driven by higher volumes, which were up by 5 per cent across the Group and categories, and better price mix across all brands.
“We are pleased by this performance. Although excise duty escalation on alcoholic beverages in Kenya’s the last budget impacted bottled beer, a more stable operating environment provided an opportunity to continue our growth momentum during the period.
We remain cautiously optimistic about our second half of the year, although unpredicted tax and regulatory changes and challenges in our operating environment continue to present potential risks in the horizon,” said EABL Group Managing Director and CEO, Andrew Cowan.
According to him the company leveraged on increased investment and operational efficiencies across markets and segments to expand, despite increases in alcoholic beverage taxes.
Net sales in EABL’s the largest market, Kenya, grew by 8 per cent, with beer and spirits growing by 6 per cent and 11 per cent respectively.
The market registered an outstanding performance in Senator keg, with the iconic low-priced beer, growing by a fifth with the new Kisumu investment driving growth.
Mainstream spirits and Scotch whisky sales increased by 17 per cent and 23 per cent respectively, with the remarkable performance of Black and White whisky.
However, despite the sales increase the excise duty drove sales of bottled beer down by 1 per cent, despite the successful brand campaigns such as Tusker Na Nyama and Guinness Football.
Uganda Breweries’ premiumization agenda delivered better mix and margins, helping lift net sales by 10 per cent, driven by 15 per cent growth in beer and 1 per cent in spirits, the latter was also impacted by the ban of the sachet format.
Marketing campaigns such as Bell All-Star Tour and Tusker Lite Neon Experience helped drive bottled beer growth by 15 per cent.
Launch of Black and White whisky helped lift Uganda’s Scotch performance with net sales rising by 84 per cent while the ready-to-drink category grew by 18 per cent.
Serengeti Breweries in Tanzania, the Group’s fastest-growing business, expanded by 19 per cent lifted largely by consistent performance in local executions to drive the Serengeti trademark.
According to Cowan the company leveraged several innovation initiatives during the half-year, with new brands contributing 28 per cent of the net sales.
Recently launched brands which contributed significantly to growth include: Hop House 13 Lager, Guinness Smooth, Sikera Cider, Black and White whisky, and Triple Ace vodka.