EABL profit drops 15% due to high costs, competition :: Kenya

East African Breweries Limited (EABL) has announced a 15% drop in its net profits for the year ended June 2018, while it's struggling to increase its profits without selling badets. .

The brewer said his after-tax profits declined from Sh 8.5 billion in 2017 to Shillings 7.2 billion during the year ending June 30, due to 39, a "single tax provision".

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Its turnover rose five percent to reach Sh73.4 billion but costs ran ahead of the income and have had an impact on the bottom line. Costs increased by 2.8 billion shillings to 20 billion shillings, reducing revenue growth.

"Profit after tax decreased by 15 percent due to the exceptional tax provision, but a strong underlying performance with strong cash flow guaranteed the necessary financing for a higher investment over the period."

But he did not provide details about the exact nature of the tax provision.

The board of directors of the company recommended a final dividend of 5.50 shillings per share to maintain the total dividend for the year at 7.5 shillings per share, which is the same as the dividend per share. He paid last year.

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EABL struggled to sell its traditional beers in a market now flooded with cheaper imports. The changing tastes and consumption patterns that have seen the appetite for the premium of alcohol also increase the brewer's market share.

In the past five years, the company's profits have been boosted by the sale of its badets, mainly land and buildings, which has helped to boost profits.

For example, in the first half of the year, the company realized a gain of 700 million shillings on the sale of land decommissioned in Mombasa, thus amortizing its profits from the period .

Among the other badets that she sold include her head office in Ruaraka, a distribution warehouse, the former Castle Breweries plant and a glbad manufacturing subsidiary, Central Glbad Industries.

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Freeing Money

EABL stated that it was not a question of selling non-core badets to free up money and invest in its core business.

The increasing direct importation of some key brands manufactured by its parent Diageo, like the popular Johnnie Walker, has also lost revenue to the distribution.

To cushion its flagship brand, Tusker, of the changing market, the company is injecting billions of shillings into its innovation center in order to offer beer variants to keep it on the shelves.

He also introduced at least five new brands including Hop House 13 beer, Zinga beer, Black & White whiskey and Triple Ace vodka to attract new drinkers.

EABL reported that its spirits business grew by 8%, driven by the strong performance of the traditional spirits portfolio, which rose 23% while beer increased 4%.

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