Bralirwa seeks $25m loan to boost production capacity, revenue

Saturday March 14 2015

A section of the beer production line at Bralirwa. PHOTO | FILE

Rwanda stock Exchange-listed brewer Bralirwa Ltd plans to borrow $25 million from the International Finance Corporation in coming months to expand its capacity as it seeks to shore up its faltering revenues.

While the exact details are yet to be made public, The EastAfrican has learnt that the company is planning to raise $50 million to fund its expansion programme as it eyes the regional market.

Bralirwa’s revenues have recently dropped due to tough regulatory rules introduced in its previously biggest export market — the Democratic Republic of Congo (DRC) — in April last year, following complaints from a Congolese company producing the same products.

As a result, the company stopped exports to eastern DRC, which has hit its balance sheet, given that total revenues from export of beer from Rwanda to DRC were between approximately Rwf27 billion ($37 million) and Rwf40.8 billion ($56 million) in the past two years.

READ: Bralirwa feeling effects of new beer levy by Kinshasa

This has left Burundi, as its major export market since volumes to other countries in East Africa are still low.


While competition has been growing on the local beer market with the entry of Belgium-based brewery- Unibra, Kenya-based EABL and Uganda’s Nile Breweries Ltd, Bralirwa’s exports to the regional market remain limited.

However, Rwanda’s beer demand at 1.2 million hectolitres remains largely dominated by Bralirwa beer brands in particular —Primus, Mützig, Legend Extra Stout, Amstel and Turbo King. In addition, it sells Heineken, which is imported from the Netherlands.

It also has a contract with Coca-Cola Company to manufacture soft drinks such as Coca-Cola, Fanta Orange, Fanta Citrus, Fanta Fiesta, Sprite, Krest Tonic and the company’s own brand, Vital’O.

“Competition has become stiff and it is expected to continue. This coupled with the challenges in the DRC export market will have an impact on the company’s performance.

“But the company is in the process of expanding capacity. This is why they decided to offer a bonus share last year,” an industry expert told The EastAfrican on condition of anonymity.

“Their strategic advantage is that they produce both beer and soft drinks unlike most breweries in the region, which produce only alcohol — this will help balance the profits in the face of competition.

But they need to compete effectively by increasing efficiency and cutting costs. Introducing new brands will not have an immediate impact on the balance sheet,” he added.

Bralirwa has shed half of its value, with the counter now trading at Rwf380 ($0.52) from a peak of Rwf860 ($1.28) at the beginning of last year though this is attributed to the bonus share issued by the company last year.

Bralirwa, which is 75 per cent-owned by Heineken, profits eased to Rwf8.22 billion ($12 million) in the first half of 2014 from Rwf10.36 billion ($141.9 million) in the first half of 2013 on account of rising costs of materials, negative foreign exchange effects and rising depreciation charges.

The company said it anticipates a similar trend in the second half of 2014.

Since the establishment of a brewery in Goma in early 2013, DRC has raised the import tariff on beer from $2.9 to $5.74 per crate and introduced a higher charge for quality standard verification, from $0.48 to $0.91 per bottle rack.

These increases and the end of Bralirwa’s licence to produce and sell Guinness Foreign Extra Stout produced by EABL in 2013, have also affected its revenue, forcing it to recently launch its own Stout brand — Legend Extra at competitive prices, whereby a 30CL bottle goes for Rwf500 ($0.69) while an ordinary Guinness bottle costs Rwf1,000 ($1.39).

Analysts said the company’s future earnings will depend on expanding capacity beyond the Rwandan market in the face of growing competition from the region.

“They may want to enter into other markets — Bralirwa has to attack their (regional breweries) their market share,” said Eric Rutabana, chief investment officer, Business Partners International Rwanda.