* H1 pretax rises to 6.08 bln shillings
* Revenue up 4 percent at 31.86 billion
* Tax, slowdown in Tanzania to curb earnings growth
* Posts growth in sales of premium brands
* Shares down 1.6 pct
(Recasts with Senator Keg, adds outlook, shares, analyst)
By Duncan Miriri
NAIROBI, Feb 14 East African Breweries Ltd
(EABL) said a duty imposed on its low-end Senator Keg
beer in Kenya had slashed sales volume of the brand, warning the
downturn in one of its top-selling products would help curb
profit growth this year.
The new tax imposed on Senator Keg, previously exempt from
excise duties, hiked its price 60 percent to 40 shillings and
cut sales 85 percent in the six months through December, forcing
EABL to come up with a response, such as the launch of new
bottled beer for the low-end of the market.
"We have got some work to do to mitigate the effects of that
(excise tax)," Chief Executive Charles Ireland told a news
conference after EABL reported a 5 percent increase in
first-half pretax profit to 6.08 billion shillings ($70.5
Analysts said the duty on Senator Keg, imposed by the
government to shore up its revenues, illustrated how firms
looking to ride the consumer boom in Africa need to be nimble
enough to respond to changing regulatory environments and other
"We should not forget that these markets have challenges ...
it is not like the African consumer is just sitting there
waiting to consume your products," said Eric Musau, an analyst
at Standard Investment Bank.
EABL, controlled by Britain's Diageo Plc, said it
expected to post single-digit revenue and profit growth in its
financial year through June, curbed by distribution issues in
Tanzania as well as the new taxes in its home market.
"We expect our revenue and profitability to grow
marginally," Ireland told a news conference.
The brewer said first-half revenue grew 4 percent to 31.86
billion while earnings per share rose to 4.99 shillings from
4.75 shillings a year before. It plans to pay an unchanged
interim dividend of 1.50 shillings per share.
EABL does not say how much of its profits come from specific
brands, but Senator Keg, sold in distinctive glass cups or mugs
as opposed to bottles or cans, was a key product in a market
where a huge segment of the population cannot afford more
Elsewhere, EABL posted single- to triple-digit growth in
sales across most of its products, which range from Tusker beer
to Johnny Walker whisky.
Sales of premium beers and spirits were helped by consumers
getting more affluent in the midst of robust economic expansion
in the region, Ireland said.
Uganda, which suffered from sluggish sales in previous
years, rebounded during the period, contributing to the 4
percent rise in sales. But in Tanzania sales dropped by 11
percent, mainly due to the firm shifting to a new, dedicated
distribution network, to cut reliance on independent
SABMiller's Tanzania Breweries enjoys a
huge lead in east Africa's second-largest economy, controlling
70 percent of the market. EABL hopes to chip away at its rival's
advantage with the new distributor network.
"In Tanzania, the work we are doing is a future game,"
Ireland said, adding he expected the business to start growing
in the next financial year.
EABL shares fell 1.6 percent to 245 shillings.
Musau at Standard Investment Bank saw a "fair value" on the
stock at 198 shillings. Many large African stocks have Benefited
in the past year from foreign investors seeking to tap into the
impressive growth rates across much of the continent.
"From a strategy perspective they seem to be doing the right
things but we are slightly concerned by the share price," Musau
($1 = 86.3000 Kenyan shillings)
(Editing by Drazen Jorgic and David Holmes)