Diageo’s Kenyan Unit Posts 18% Drop in Profit on Finance Costs

Diageo Plc’s Kenyan unit, East Africa’s biggest brewer, said first-half profit dropped 18 percent as financing costs more than tripled.

Net income fell to 3.76 billion shillings ($43 million) in the six months through December from 4.88 billion shillings a year earlier, East African Breweries Ltd. said in a statement e- mailed by the Nairobi Securities Exchange today. Financing costs jumped to 2.06 billion shillings from 642 million shillings.

“I was expecting the fall in profit because we were concerned by the level of finance costs,” Eric Musau, a research analyst at Nairobi-based Standard Investment Bank Ltd., said in an interview. The brokerage has a sell recommendation on the stock, he said.

Interest rates in Kenya, East Africa’s biggest economy, surged to a record in 2011 as the central bank sought to bolster a collapsing currency and curb price pressures after the worst drought in decades. The Monetary Policy Committee cut the benchmark rate three times to 11 percent during the second half of the year.

Diageo, the world’s largest distiller, owns 42.8 percent of East African Breweries.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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