East African Breweries Limited recorded a 5% growth in revenue that was Kshs 73.5 billion in figures. A 20% increase was witnessed in commercialization given the adoption of the bottled beer production. The gross profit margin was perched at 44% as capital expenditure was pegged at Kshs 13 billion by close of business year. The company is keen on investing on the brands it produces and this has been reemphasized by the new brewery that is set to commence production within the first 6 months of the company’s next business year.
The following is an excerpt from East African Breweries Limited 2018 annual report Chairman’s message.
We commissioned the construction of a new brewery in Kisumu and in tandem with that commenced our “Grain to Glass” awareness campaign recruiting thousands of farmers and retailers to support the activities of the new brewery once operational. Our business in Tanzania
recorded an impressive trajectory, reporting significant double-digit growth in sales and profitability. All in all, the business has a lot to celebrate about.
In light of the above, I am pleased to report a strong performance in the year delivering a growth of 5% in Net Sales and 4% in Profit from operations excluding the tax provision. These results demonstrate once again the strength of our brands and people; to deliver a resilient performance in the first half of the year and a turnaround in the second half when the economies showed improvement.
EABL achieved a solid year on year performance driven by continued strong mainstream spirits performance, improved bottled beer growth and a resilient Scotch delivery. However, the performance was muted by decline of Senator keg and electoral uncertainty in Kenya in the first half coupled with a challenging and competitive trading environment in Uganda and Tanzania.
Significant business resilience throughout the year and growth across most of our categories delivered Kshs 73.5 billion in revenue, a 5% growth compared to the prior year.
Selling and distribution costs grew by 20% as we invested in rejuvenating bottled beer and accelerating momentum in innovation during the year in line with our strategy and commitment.
Administrative expenses increased by 3% in line with inflation and securing our growth plans with the right resources.
The business delivered a gross profit margin and operating margin of 44% and 19% respectively with the latter excluding the impact of a one-off tax provision. Profit for the year decreased 15% driven by the one-off provision excluding which there would have been a 3% growth.
EABL’s continued investment into the future growth through increased capacity and operational efficiency saw capital expenditure of Kshs 13 billion in the year. The new brewery in Kisumu, a Kshs 15 billion investment is scheduled to commence its operations in the first half of the new financial year.
During the year, EABL delivered performance through our rich portfolio of brands coupled with the concerted effort and dynamism of all the management and staff. Our continued focus on the key principles that have been the solid bedrock of the Company- investing in our brands while securing this with robust talent and keeping our shareholder value at the core of it all.
Looking ahead, there is reason for guarded optimism informed by the improving consumer spending-power and the enhanced political stability in key markets in the region. The private sector hinges its expectations for the next 12 months on the prospects of stable macroeconomic environment, favourable weather conditions, improved business environment and investor confidence, continued public investment in infrastructure and political stability. This bodes well for the coming years.