Diageo’s Kenyan Unit Falls Most in Two Months on Profit WarningEric Ombok
Diageo Plc’s Kenyan unit, East Africa’s biggest beermaker, dropped the most in two months after it said full-year profit will fall more than 25 percent because of higher financing charges.
East African Breweries Ltd. declined 3.7 percent to 336 shillings by the close in Nairobi, the largest retreat since May 24. About 179,800 shares were traded, equivalent to 68 percent of the three-month daily average volume. Results will be released on Aug. 23, the company 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 and sold a similar shareholding it held in Tanzania Breweries Ltd. to SABMiller, EABL said. 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.