Bloomberg News

Diageo Kenyan Unit First-Half Profit Rises 17% as Sales Jump

February 17, 2012

(Updates with analyst comment in sixth paragraph, CEO in eighth.)

Feb. 17 (Bloomberg) -- East African Breweries Ltd., the Kenyan unit of Diageo Plc., said first-half profit grew 17 percent as revenue jumped following an increase in sales of spirits. The shares climbed to a one-month high.

Net income climbed to 4.88 billion shillings ($59 million) in the six months through December from 4.15 billion shillings a year earlier, the Nairobi-based company said in a statement e- mailed by the city’s stock exchange today. Sales rose 36 percent to 27.8 billion shillings.

“Despite tough macroeconomic conditions across all sectors in Kenya and the short-term market events, we feel that these results are good,” Securities Africa Trading, a Johannesburg- based pan-African brokerage, said in an e-mailed research note. Growth in revenue was driven by a “strong performance across all brands,” it said.

Kenya’s central bank raised interest rates to a record 18 percent last year after inflation surged to 19.7 percent and the shilling fell to a low of 106.75 per dollar. Growth in East Africa’s biggest economy slowed to 4.2 percent in the first nine months of 2011 from 4.9 percent a year earlier, according to the Finance Ministry.

Disposable income in Kenya was “challenged” last year by inflation, while input costs increased by 400 million shillings because of the currency’s depreciation, Chief Executive Officer Seni Adetu told reporters at a briefing in Nairobi.

‘Further Acceleration’

“They have hit the ball out of the park,” said Aly Khan Satchu, chief executive officer of Nairobi-based investment company Rich Management, said in an interview today. “I see further acceleration in full year.”

EABL shares rose 2.3 percent to 180 shillings at 11:40 a.m. in Nairobi. The company, Kenya’s biggest by market value, proposed paying a dividend of 2.5 shillings per share.

Growth in both sales and profit was supported by “continued focus on investments behind our brands, new products and performance of spirits,” Adetu said. The contribution of spirits increased to 15 percent from 11 percent a year earlier and is expected to double in two to three years, he said.

EABL plans to invest as much as 30 million U.K. pounds ($47 million) in its operations across east Africa in the six months to June 30, Adetu said.

About 5 million pounds will be spent on a 500,000 hectoliter canning plant in Kenya to serve the whole of east Africa, and another 15 million pounds on increasing brewing capacity in Uganda, he said.

--Editors: Paul Richardson, Hilton Shone, Ben Holland.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net


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