EABL saves US$10m on new beer plant budget

KENYA – Beer-maker East African Breweries (EABL) said that the company will save US$10 million on its investment in the new Senator Keg beer plant in Kisumu as a result of more local sourcing of construction materials and delivery of project ahead of time representing a 6% reduction from its initial US$150 million investment budget on the plant, reports Business Daily.

Andrew Cowan, Managing Director EABL, says good procurement expertise and speed of execution will see the firm spend a total US$140 million 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.

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 US$102 million on the plant in 2018 and will use a further US$38 million in the second half of current financial year.

“Originally, we announced that we intended to spend US$150 million on the project. We are close to completion and we now see that total amount will be slightly lower,” he said.

Mr Cowan further revealed that the plant has been carrying out test brewing and is expected to start commence its commercial operations before March 2019.

“We are now ready to open and start production for commercial—probably in this quarter,” he explained.

EABL has already rolled out a local raw material sourcing project with over 15000 sorghum farmers in the region ahead of commissioning operations in the plant to help meet the increased demand for raw materials ahead of commissioning operations of the plant.

In the financial year ended June 2018, the Nairobi Securities Exchange-listed brewery spent US$14.8 million on 60,000 small-scale growers whom it had contracted to ensure steady grain supply of raw material.

Managing director of Kenya Breweries Limited, Jane Karuku says the company has pushed local sourcing of raw material above 80%, helping it save on costs.

Consumption of Senator Keg, a brand in the brewer’s portfolio, dropped by 13% in the previous financial year on plant shut down and tax uncertainties but has rebounded by 35% driven by increased distribution and brand rejuvenation through commercials.

The net sales of the brand grew by US$18.86 million in half year ended December 2018.

EABL posted 33% growth in its half-year profits to US$ 65.6 million attributed to strong performance across all segments and markets.

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