East African Breweries Ltd, the division of Diageo, has reported a 9% fall in net profits for its fiscal half-year, despite a rise in sales.

Profits slipped to KES3.69bn (US$48m) for the six months to the end of December, compared to KES4bn in the same period of 2008, East African Breweries (EABL) said yesterday (16 February).

Operating profits fell 6% to KES5.6bn, as the company battled to absorb unfavourable currency rates, higher raw materials costs and weakened consumer purchasing power.

Price rises on Guinness helped the firm to report a 3% rise in net sales for the period, to KES18.6bn.

Total volumes fell by 10%, reflected low single digit decline in beer and a significant drop in spirits sales, due to higher duty tax.

Economies in the group's key African markets have not been immune to the global economic downturn in 2009. Growth in gross domestic product fell to 2% in Kenya, from 4.5% in 2008 and 6% in 2007. Uganda and Tanzania also registered falls in growth in 2009.

However, EABL said that it expects economic recovery in all three countries in calendar 2010 and that a tax reduction on spirits in Kenya will see a reversal of the half-year the sales in the category.

EABL added that it still plans to raise advertising and promotion spend.