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Diageo’s Kenyan Unit Falls Most a Month After Profit Warning

Diageo Plc (DGE)’s Kenyan unit, East Africa’s biggest beermaker, dropped the most in a month after it said full-year profit will fall more than 25 percent because of higher financing charges.

East African Breweries Ltd. declined as much as 6 percent and traded 2.6 percent lower at 340 shillings by 11:35 a.m. in Nairobi, the largest retreat on a closing basis since June 27. More than 82,400 shares were traded, equivalent to 31 percent of the three-month daily average volume. Results will be released on Aug. 23, it said in a statement e-mailed yesterday by the Nairobi Securities Exchange.

The company took a loan in November 2011 to buy a 20 percent stake in Kenya Breweries Ltd. from SABMiller Plc (SAB) and sold a similar shareholding it held in Tanzania Breweries Ltd. to SABMiller, EABL said yesterday in an e-mailed statement. Interest on the loan covered a full year of trading, compared with seven months in the prior fiscal year, it said.

The “bottom line comes in weak as a result of higher finance costs and the absence of the one-off gain of 3.6 billion from the sale of its stake in Tanzania Breweries,” Nairobi-based Standard Investment Bank Ltd., which has a sell recommendation on the stock with a price target of 211.70 shillings, said today in an e-mailed note to clients.

EABL’s fiscal year ended on June 30 and the median estimate of seven analysts surveyed by Bloomberg predicts adjusted net income will be 8.18 billion shillings ($93.6 million). That compares with profit of 11.2 billion shillings reported a year earlier.

First-half profit through December dropped 18 percent to 3.76 billion shillings as financing costs more than tripled, EABL said in February.

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

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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