Rise in investments and sales costs has led to a 14 percent drop in the East African Breweries Limited's (EABL) first half net profit ending December 2012 to Sh3.7 billion from 4.3 billion in the previous period.
Net financing costs went up by 221 percent from Sh642 million in 2011 to Sh2.06 billion, with sales cost going up by 10 percent to Sh436 million from Sh134 million.
Tracey Barnes, Group Finance Director said the rise in financing cost was largely due to the borrowing of a Sh19 billion loan to buy the minority interest at Kenya Breweries Limited.
"The costs of sales were partially due to an increase in input costs, specifically some elements of our raw material purchases and distribution costs. I would say this is inevitable part as we expand our markets and reaching more customers," Barnes said.
Profit before tax went down by 13 percent from Sh6.6 billion during the period in 2011 to Sh5.7 billion.
Barnes said the company which is controlled by Britain's Diageo, will focus more on managing its administration costs which went down by 3 percent from Sh3.6 billion to Sh3.5 billion.
However revenues went up by 10 percent from Sh27.7 billion in 2011 to Sh30.6 billion due to growth in the premium sales of spirits by 45 percent and beer by 19 percent.
EABL CEO Devlin Hainsworth said softening consumer economy and duty rise led to Uganda recording the least growth in total sales of 3 percent.
"Our continued support investment in new markets saw our international business grow by 28 percent occasioned by our route to market expansion into South Sudan and Great Lakes regions which include Rwanda Burundi and DRC," Hainsworth noted.
"Since 2010, EABL has made substantial capital investments in line with long term growth strategy with an additional injection of Sh4 billion investment in capacity and process improvements in Kenya," he added.
Despite the decline in profits, shareholders have a reason to smile after the board of directors announced a Sh1.50 dividend per share to its shareholders.
The largest East African brewing company owns 100 percent of Kenya Breweries, 98.2 percent of Uganda Breweries, 100 percent of Central Glass, 100 percent of Kenya Maltings and 46 percent of United Distillers and Vintners (Kenya) Limited, 100 percent of International Distillers Uganda, 100 percent EABL International (responsible for exporting), 100 percent of East African Maltings, 100 percent EABL Foundation and 51 percent of Serengeti Breweries limited.
