E-Malt.com News article: 3168

Africa, Nairobi: East African Breweries Ltd. (EABL) said on Friday, August 27 its after-tax profit more than doubled in the financial year ending in June, and announced plans to boost the number of its shares to improve liquidity. The regional brewer posted a 141 % surge in after tax profit to 4.748 billion shillings ($58.46 million) from 1.964 billion last year. Sales grew modestly to 30.1 billion shillings ($370.6 million) from 28.9 billion, an increase of 4 %.

The company's 2002/03 profits were dragged down by a 1.7 billion shilling restructuring cost. East African Breweries is 50-percent owned by the world's largest spirits group Diageo of the U.K. The brewer's shares rose on the news, touching a high of 539 shillings before closing at 5 percent higher at 524 shillings compared to Thursday's close of 499 shillings.

Best known for its Tusker brand, EABL said it would propose increasing its share capital by 50 million shares of 10 shillings each, taking to total number of shares to 200 million. It proposed giving a bonus share for every five shares held, after the issue EABL would carry out a 5-for-1 share split in a bid to attract more liquidity and individual investors to the stock.

"Psychologically, the market would prefer five shares at 100 shillings each than one at 500 shillings," EABL Group Finance Director Peter Fullam said. If the share split scheme was approved at EABL's annual general meeting in November it would boost the number of shares to 1.0 billion. EABL has the largest market capitalisation on Nairobi's bourse. It has been the stock market's most sought-after share by foreign investors.

However, the company which has interests in Uganda and Tanzania is struggling to grow its sales especially in its biggest market, Kenya, where 31 percent of adults drink alcohol, of which only 40 percent drink EABL products. "There is a very big market there available to us," EABL Managing Director Gerald Mahinda told a news conference.

Weak economic growth hurts the regulated drinks industry which must compete with illicit dens selling strong, homemade brews at a fraction of the price of branded beer. Mahinda said Senator, which was launched in December as a low-cost, high-alcohol alternative to traditional brews, now accounted for 10 percent of total sales in Kenya. He said EABL was experimenting with producing Senator in draught form and selling it in traditional drinking dens.

"It will be cheaper to produce in draught than in bottles and it'll have a better penetration in that market," Mahinda said, pointing to a photo of a ramshackle, iron-roofed liquor den with a drinker inside, his face buried in a tin container of traditional brew.

Mahinda said EABL would also focus on exporting its products as a way of boosting volume growth, targeting the United States, Britain, the Far East and southern Africa.


01 September, 2004