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Tough times for beer seller EABL

10 August 2014, 10:25

Nairobi - East African Breweries Limited's pretax profit fell 6 percent to 10.41 billion shillings ($118.56 million) in its year ended June, the company said on Thursday.

The firm, controlled by Britain's Diageo, said its sales volumes were hit by the imposition of an excise tax on its low-end Kenyan beer, Senator Keg, last October.

Previously exempt from excise duties, Senator Keg's price shot up to 40 shillings per mug from 25 shillings, putting off consumers and forcing EABL to launch a new bottled beer for the low-end of the market.

The government introduced the taxes to shore up its revenues but it failed to meet the targeted revenue through the duty after sales plummeted by more than 70 percent.

EABL's Chief Executive Charles Ireland said the company may stop producing the beer, which is dispensed from barrels in bars, if the government does not reverse its decision on taxes.

"We need to have a hard look at Senator unless the taxes are rolled back. At the current level, Senator is not sustainable," he told a news conference.

Other categories, including mainstream beers such as Tusker and premium whiskeys such as Johnnie Walker, grew by single to double digits across Kenya, Uganda, Tanzania and other export markets, helping to raise the net sales value by 4 percent to 61.30 billion shillings.

Tracey Barnes, EABL's finance director, said operating profit for the period to the end of June fell 2 percent to 14.67 billion shillings, mainly due to a one-off item of 1.2 billion shillings spent on restructuring and job cuts at the company.

EABL maintained the dividend per share for the year at 5.50 shillings including an interim dividend of 1.50 shillings.

Shares in the brewer, rose about 7 percent over the past week but lost 1.3 percent on Thursday to close at 309 shillings each. EABL's results were announced after the markets closed.

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- Reuters


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