Beer-maker East African Breweries (EABL) #ticker:EABL says it will now spend Sh14 billion on its Kisumu plant instead of the budgeted Sh15 billion helped by use of more local construction materials and delivery of project ahead of time.
Group managing director Andrew Cowan says good procurement expertise and speed of execution has helped EABL save Sh1 billion on the project that promises to deliver more revenue for the firm.
“We intended to use two years to build, test, commission and open the breweries but we are now going to take 18 to 19 months. This helped cut costs,” said Mr Cowan yesterday in a briefing in Nairobi.
He added that procuring most of the materials locally also helped cut on costs such as shipping as the brewer moved to control its capital expenditures.
EABL finance director Gyorgy Geiszl said the company spent Sh10.2 billion on the plant in 2018 and will use a further Sh3.8 billion in the second half of current financial year.
“Originally, we announced that we intended to spend Sh15 billion on the project. We are close to completion and we now see that total amount will be slightly lower,” he said.
The plant has been carrying out test brewing and Mr Cowan says it should start commercial brewing before March, coming at a time net sales of Senator Keg has grown by Sh1.9 billion in half year ended December 2018.
“We are now ready to open and start production for commercial—probably in this quarter,” he said.
The EABL has on-boarded 15,000 sorghum farmers in Western Kenya to help meet the increased demand for raw materials ahead of opening of the Kisumu plant.
The Nairobi Securities Exchange-listed brewery has 60,000 small-scale growers on contract to ensure steady grain supply and spent Sh1.5 billion to pay them in financial year ended June 2018.
Managing director of Kenya Breweries Limited Jane Karuku says the company has pushed local sourcing of raw material above 80 per cent, helping it save on costs.
Consumption of Senator Keg had dropped by 13 per cent in the previous financial year on plant shut down and tax uncertainties but has rebounded by 35 per cent driven by increased distribution and brand rejuvenation through commercials.
The EABL booked 33 per cent growth in its half-year profits to Sh6.61 billion driven by strong performance across all segments and markets.
The half year results means that EABL has achieved 91 per cent of the profit it attained in full year ended June 2018, placing it on strong footing in 2019.