EABL to defend Tanzania investment

KENYA’S East African Breweries Limited (EABL) said last week it would try to convince government authorities not to revoke its acquisition of a controlling stake in Tanzania’s second-largest brewery.

Tanzania’s Fair Competition Commission (FCC) said early this month that it wants to revoke EABL’s 51 per cent stake in Serengeti Breweries, acquired five years ago, accusing the Kenyan company of not meeting some conditions.

EABL, which is controlled by Britain’s Diageo, paid 60 million US dollars for its stake in Serengeti, giving it a 28 per cent share in a market offering high growth potential. But the FCC has accused EABL of not making good on pledges made when it obtained permission for the deal. EABL has denied the accusation.

The FCC said in a statement on June 29 an investigation into the merger revealed that the “performance of SBL was not as per expectations of the Commission.”

It said it had approved the merger in 2010 under the condition that EABL would enable Serengeti to achieve “potential growth that is well beyond the level it was able to achieve previously.”

Charles Ireland, EABL’s chief executive, said at a news conference on Friday to announce the brewer’s annual results that he would meet FCC officials today.

“The FCC has expressed disappointment in the performance of the business and has called us to explain why the business has not been performing to expectations,” Ireland said.

“I think probably they need reassurance that we are committed to Tanzania, and we are going to be making investments in Tanzania and ultimately we are going to be successful.”

EABL reported a 36 percent rise in pretax profit to Ksh14.15 billion ($139 million) in the year to end-June, boosted by higher sales, which sent its shares rising.

Revenues were up 6 percent to Ksh 64.42 billion, the brewer said, with sales rising by 2-7 per cent in Uganda, Kenya and Tanzania and exports to other markets jumping by 48 per cent.

EABL plans to hedge against weaker regional currencies during this financial year, to avoid a repeat of a 900 million foreign exchange loss in the year just ended.

“That prompted us to accelerate our plans for hedging against those currencies, which we are just about to put in place,” Tracey Barnes, EABL’s chief financial officer, said.

The brewer raised its final dividend to Ksh 6.0 per share from 5.50 a year earlier. That took its total dividend for the year to Ksh7.50 per share, up from Ksh 5.50 last year.

Earnings per share rose to Ksh 11.32 from Ksh 8.22 a year earlier, the firm said.

SOURCE: DAILY NEWS

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