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East African Breweries Profit Hurt By Rising Costs
Beer bottles roll on a conveyor belt at the East African Breweries Ruaraka factory in Kenya's capital Nairobi, February 17, 2010. REUTERS/Thomas Mukoya
By Duncan Miriri
23/08/2013
NAIROBI (Reuters) - Full-year pretax profit at East African Breweries fell by more than a quarter as expected due to a one-off item and soft demand in markets such as Uganda and Tanzania.
The brewer, controlled by Britain's Diageo Plc, on Friday posted profit for the year to the end of June of 11.11 billion shillings on revenue up 6 percent to 59.06 billion shillings.
The brewer warned in July that its profit would drop by more than a quarter due to higher financing costs from an acquisition.
EABL also had a 3.6 billion shilling one-off gain in the year-ago period from the sale of its stake in Tanzania Breweries.
Charles Ireland, managing director of EABL, told investors that the Ugandan market, which accounts for 16 percent of sales, recorded flat sales growth, as the economy reeled from withholding of donor aid that curbed demand.
The cost of sales rose 10 percent to 31.56 billion shillings, which Tracey Barnes, EABL's group finance director, blamed on higher distribution and energy costs and depreciation.
Barnes said revenue growth had also slowed due to soft market conditions in Tanzania, which accounts for 12 percent of sales.
The brewer's basic earnings per share dropped to 8.83 shillings from 13.46 in the year ended June 2012.
Shares in EABL rose nearly 1 percent to 308 shillings per share after the results.
Eric Musau, an analyst at Standard Investment Bank, said he was satisfied with the company's strategy but concerned by the price of the shares.
The stock trades at a multiple of more than 30 times earnings, compared with a market average of 10-15 times.
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