2013 Annual Report East African Breweries Limited East African Breweries Limited Corporate Centre, Ruaraka P.O. Box 30161 - 00100 Nairobi, Kenya www.eabl.com Building East Africa’s Most Celebrated Business... | 2013 EABL Annual Report & Financial Statements 1 Contents 2 2013 EABL Annual Report & Financial Statements | Financial Highlights 5 Chairman’s Statement 6 Brands 10 Investing behind our Iconic Beer Brands 12 Growing Faster with Spirits 16 Innovation to meet new Consumer Needs 18 Supply Chain 22 Production 24 Agriculture 24 People 28 Building our Talent 31 Quick Overview Building our Culture, Celebrating our Legacy 32 Building our Staff Welfare 32 Reputation 34 Community Engagement 36 Responsible Drinking 38 Compliance and Ethics 39 Performance 42 Board of Directors 44 Notice of the Annual General Meeting 46 Corporate Governance 50 Shareholding Structure 55 Financial Section 58 Building East Africa’s most celebrated business through our… Brands Supply Chain People Reputation Five Gold & Six Silver Awards - Monde We firmly adhere to world-class EABL declared ‘Best Company to Work By positively contributing to the 2013 standards in order to produce only the For’ in Kenya development of the communities best. Recognition of our seamless supply Our commitment to creating the best around us, we promote overall Tusker, Tusker Malt, Tusker Lite, chain is proof of our meticulous, quality working environment for our staff has growth for all. Serengeti Premium Lager and Uganda raw material sourcing and manufacturing taken us to greater heights. Waragi scooped gold awards from the processes keen to deliver superior prestigious Monde Selection. products consistently. Financial Highlights Net Sales Value Kshs(’000,000) Profit Before Tax Kshs(’000,000) 59,061,875m in 2013 11,114,919m in 2013 55,522,166m in 2012 15,253,049m in 2012 59,061,875 11,114,919 55,522,166 15,253,049 44,895,037 12,258,989 38,679,196 12,568,087 34,407,715 11,506,951 Earnings per Share Kshs Dividend per Share Kshs 8.83 in 2013 5.50 in 2013 13.46 in 2012 8.75 in 2012 8.83 5.50 13.46 8.75 9.30 8.75 9.08 8.75 8.71 8.05 2013 2012 2011 2010 2009 Financial Highlights | 2013 EABL Annual Report & Financial Statements 5 Chairman’s Statement We have completed another exciting year for EABL, as we move closer to our goal of building Eastern Africa’s most celebrated business. East African Breweries Limited (EABL) is the leading In spite of this, EABL delivered a robust performance beverage alcohol company in Eastern Africa. We in the financial year, with net sales growth of 6% and have strong brands and a proven business model growth of 0.2% in operating profit before financing which spans seven countries in the region. This and exceptional items. We believe that this growth geographic diversity presents us with an attractive demonstrates the strength of EABL’s business long-term growth opportunity given the forecast model and its resilience in the face of some tough high growth rates of the consumer economies market conditions. where we operate. We also made significant progress on our strategic We are encouraged by the increasing stability we are agenda in the year. We have made deliberate choices seeing in the region both economically and to build a legacy that will stand the test of time politically. Interest rates and inflation are broadly through the investments we make. stable, prospects for oil and gas exploitation are improving, and infrastructure development is In the financial year, EABL invested Kshs 6 billion in accelerating. Peaceful elections held in Kenya in net capital expenditure. Our latest investments 2013 should act as a springboard for further include a new and expanded warehouse at the Kenya investment in the region. These are positive Breweries Limited plant, a new packaging line in indicators that bolster our confidence in the Uganda, a new spirits line and a yeast recovery plant continued growth of the consumer economies in in Kenya. We are procuring new dual purpose vessel our region. tanks and bright beer tanks to enhance our brewing efficiency. We have also completed the construction However, the geographic diversity that EABL enjoys of effluent treatment plants in all our sites. can also expose us to any areas of volatility across the region. This was demonstrated during the last financial year where we saw strong market growth in As part of our manufacturing excellence programmes, Kenya but experienced some market softness in we achieved key milestones in having our key beer Uganda, Tanzania and South Sudan. In Uganda, brands being produced at all brewing sites, eliminating there was an economic slowdown which affected the need to export the brands across the markets. As a consumer purchasing power; in Tanzania, the result, we now have Tusker Lager, Tusker Lite, Tusker beverage alcohol sector contracted following a 25% Malt Lager, Guinness, Pilsner and Senator being rise in excise duty; and in South Sudan, there was a brewed in Uganda and Tanzania. scarcity of hard currency which impacted the consumer economy. We are committed to strengthening the consumer equity of our brands. Our investment in advertising and promotion rose by 11% in the year, and I am proud 6 2013 EABL Annual Report & Financial Statements | Chairman's Statement Taarifa Ya Mwenyekiti Tumekamilisha mwaka mwingine wa kusisimua EABL, huku tukizidi kukaribia lengo letu la kuijenga biashara iliyosifika zaidi katika kanda la Afrika Mashariki. Kampuni ya East African Breweries Limited (EABL) Licha ya hayo, kampuni ya EABL iliimarika katika inaongoza katika utengenezaji wa vinywaji vya mwaka wa kifedha, tukinakili ukuaji wa mauzo ya pombe katika eneo la Afrika Mashariki. Tuna bidhaa asilimia 6, na ukuaji wa faida ya uendeshaji ya bora pamoja na mpangilio wa biashara iliyothibitika, asilimia 0.2 kabla ya kutoa athari za shughuli za katika nchi saba eneo hili. Umahiri wetu wa kijiografia kipekee na za kifedha. Tunaamini ya kwamba unatupa nafasi murwa ya kujiendeleza kwa kipindi ukuaji huu unathibitisha umaarufu wa mpangilio cha muda mrefu, hasa kufuatia utabiri wa uchumi wa biashara ya EABL pamoja na ujasiri wake dhidi unaoendelea kuimarika kwa kasi eneo hili letu. ya hali ngumu ya soko. Tunahamasishwa na utulivu unaoboreka wa Pia, tumeweza kupiga hatua kubwa kimkakati katika kiuchumi pamoja na wa kisiasa katika eneo la mwaka jana. Tumetekeleza uamuzi makusudi wa Afrika Mashariki. Viwango vya riba pamoja na kukuza urithi utakaodumu kupitia uwekezaji wetu. mifumuko ya bei viliweza kubaki imara, matarajio ya ugunduzi wa mafuta na gesi ya kuchimba Katika mwaka huo wa kifedha, kampuni ya EABL yanaimarika, na pia maendeleo ya miundombinu iliwekeza mtaji halisi wa shilingi bilioni 6. inazidi kwa kasi. Uchaguzi nchini Kenya Maongezo ya mtaji hivi karibuni ni pamoja na ulioendelezwa kwa amani mwaka wa 2013 upanuzi wa ghala mpya katika kiwanda cha Kenya utaweza kustawisha uwekezaji wa kibiashara Breweries, kiwanda cha ufungaji bidhaa nchini katika kanda hili la Afrika Mashariki. Hivi ni Uganda, kiwanda cha mvinyo pamoja na cha viashiria muhimu vinavyoimarisha imani yetu chachu nchini Kenya. Tulileta bomba mpya ili katika ukuaji wa uchumi wa matumizi katika kanda kuendeleza ufanisi wetu wa utengenezaji wa letu la Afrika Mashariki. pombe. Pia, tumekamilisha ujenzi wa zana za usafishaji wa maji taka katika maeneo yetu yote. Hata hivyo, umahiri wetu wa kijiografia unaoendeleza kampuni ya EABL pia huenda Kwa upande wa mipango yetu ya kuboresha ukaweza kutuambulia hali tete zilizo kwenye eneo utengenezaji, tulifikia hatua kubwa ya kuhakikisha hili letu. Hali hii ilidhihirika wazi mwaka jana bidhaa zetu muhimu zinatengenezwa katika tulipoweza kuimarisha uthabiti wetu wa kisoko viwanda vyetu vyote, hii ikituondolea changamoto nchini Kenya, ilhali soko katika nchi zinginezo za ya kusafirisha nje bidhaa hizi kwa soko mbalimbali. Uganda, Tanzania na Kusini mwa Sudan Hivyo basi, bidhaa za Tusker Lager, Tusker Lite, zikionyesha udhaifu. Nchini Uganda kutoimarika Tusker Malt Lager, Guinness, Pilsner na Senator kwa uchumi ulipunguza uwezo wa ununuzi kwa sasa zinatengenezwa nchini Uganda na Tanzania. wateja; nchini Tanzania, sekta ya utengenezaji wa pombe iliadhiriwa kutokana na nyongeza ya Tumejitolea kuimarisha umaarufu wa bidhaa zetu ushuru wa bidhaa kwa asili mia 25; na pia Kusini kwa wateja wetu. Uwekezaji wetu katika mwa Sudan, ukosefu wa pesa za kigeni ulidhuru matangazo na ukuzaji wa mauzo uliongezeka kwa uchumi wa ununuzi. asili mia 11 katika mwaka, na najivunia juhudi za timu zetu kwenye nyanja hii, zikiwemo; Chairman's Statement | 2013 EABL Annual Report & Financial Statements 7 of the work that our teams have delivered in this livelihoods for an estimated 26,000 partners across area: Tusker’s “It’s Our Time”, the new “Bell Nation”, the agricultural value chain. the Serengeti Fiesta, the relaunch of Pilsner lager being just a few of the highlights. Our commitment Over the past years, EABL has made significant to quality was demonstrated by the award of five investments in line with its growth strategy: in Gold and six Silver medals at the global Monde particular the purchase of 51% of Serengeti Breweries Selection annual awards for product excellence. Limited in Tanzania and the purchase of the 20% shareholding in Kenya Breweries Limited that we did We strengthened our spirits portfolio with the not already own. The structural and financing introduction of the Reserve portfolio of super- changes that this brought – including a one-off premium spirits. Johnnie Walker celebrated the financial benefit seen in the previous financial year progress of Paul Tergat in its “Walking with when we sold our shareholding in Tanzania Giants” campaign; Smirnoff brought a new twist Breweries Limited and the impact of interest to nights out with its Nightlife events and Baileys payments on a Kshs 19.5bn loan – can be seen in was relaunched in a sleek new bottle.