E-Malt.com News article: Kenya: East African Breweries managing director resigns

Mr. Devlin Hainsworth, the Group managing director of the East African Breweries Ltd (EABL) has resigned after serving for only eight (8) months at the regional brewer, Standard Digital reported on February, 22.

He is replaced by Charles Ireland who is planned to assume office on April 1.

Mr. Hainsworth’s resignation comes just a week after the beer maker announced a sharp drop in profitability for the half-year period ended December 31.

In a circular to the Capital Markets Authority (CMA) dated February 22, EABL Chairman Charles Muchene said Hainsworth, who has been employed with Diageo for a period of 14 years, would be leaving the business to pursue other interests, effective March 31.

Prior to his latest appointment Mr. Ireland was the managing director of Guinness Anchor Berhad (GAB) in Malaysia, a highly successful joint venture between Diageo plc and Asia Pacific Breweries.

GAB is Malaysia’s 3rd largest consumer goods business and is listed on the Malaysian stock exchange with a market capitalization of over 1 billion sterling pounds.

Ireland joined Diageo in 1997 after working for Nestle in Great Britain for 10 years.

“The chairman and the Board of EABL wish to take this opportunity to thank Mr. Devlin Hainsworth for his contribution to the business and to warmly welcome Mr. Charles Ireland to the business and to East Africa,” said Muchene.

EABL’s half-year pre-tax profit plummeted 13 per cent to Sh5.8 billion on the back of rising finance and operational costs, which more than tripled.

However, volumes and revenues grew across most regions, driven by a mixture of brand development and improved route to market.

The company, controlled by Britain's Diageo Plc, borrowed Sh 19 billion from its parent to buy the 20 percent of its subsidiary Kenya Breweries which was owned by SABMiller's Tanzania Breweries.

Consequently EABL’s financing costs increased by 221 per cent to Sh2.1 billion in the first half of 2012 from Sh642 million in the period June to December 2011.

“Despite a softening consumer economy in Uganda and a Duty rise that slowed the beverage alcohol market in Tanzania, we managed to deliver good results driven by our total beer portfolio that grew revenue by 11 per cent while spirits grew by nine per cent across the region,” Hainsworth told an investor briefing in Nairobi.

Cost of sales rose by 13 percent to Sh 16.2 billion, outpacing the growth in revenue mainly due to investments in the company's distribution network and higher input costs such as the price of buying malt.

Growth in sales was registered across all the markets although sales of low-cost spirits declined in Kenya, the firm's largest market, and slower economic growth in Uganda weakened consumer demand there, leading to growth of only 3 percent.

In addition the financial performance in Uganda was affected by plant investments, the company said.

All the other markets of Kenya, Tanzania and exports to countries like the Democratic Republic of Congo and South Sudan produced double-digit percentage rises in sales.

Hainsworth said he was particularly confident over the outlook for revenue growth due to sales of new brands in Kenya and Tanzania and generally rising demand in Tanzania.

The firm introduced new brands like Jebel spirit and Balozi beer in Kenya last year and revived the Kibo beer brand in Tanzania.

The company was, however, facing an additional challenge in the Tanzania market due to an increase in excise duty.

EABL’s sales across product portfolios and regions were sluggish with beer sales rising 11 per cent and spirits at 9 per cent.

Kenya led with beer sales up 12 per cent while Uganda grew only by three per cent.

International business expanded 28 per cent due to Sh 4.3 billion expansion of the Kenyan operations meant for exports market.

22 February, 2013