Uganda-Rwanda tiff scares Bamburi cement as profits drop

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2018 profits dropped to US$6.1 million from US$18.8 million in 2017

Cement manufacturers-Bamburi Cement has expressed concerns over the Uganda-Rwanda border row, warning it could derail its earnings.

This comes amid a drop in net profit for the year 2018, reported at Ksh614 million (US$6.1 million) down from Ksh1.9 billion (US$18.8 million) in 2017.

“The difficulties experienced in the Uganda-Rwanda border have significantly impacted exports to Rwanda from Uganda and the Group hopes this matter is resolved expeditiously,” the company said in its financial statement signed by Chairman John Simba and Group Managing Director Seddiq Hassani.

The Nairobi Securities Exchange (NSE) listed firm has however reported a 3.7 per cent jump in turnover, from Ksh36 billion (US$3.6 billion) in 2017 to Ksh37.2 billion (US$3.7 billion) in 2018 as cement volumes grew by nine per cent.

“The Group achieved this growth despite a market decline of five per cent in Kenya, our biggest market, and a flat cement market in Uganda. Increased competitive pressure fuelled by a growing gap between installed cement grinding capacity and the shrinking market has played a key role in market dynamics,” the firm has said.

However, the overall top line growth in a declining market is a clear indication that the execution of its “Building Growth” strategy has put the firm on solid track to consolidate its market leadership position.

The group operating profit reduced to Ksh800 million (US$7.9 million) in 2018 from Ksh4.2 billion (US$41.6 million) in the prior year.

Despite the increase in turnover, there was a higher cost environment relating to higher energy costs (power, coal and petcoke), imported clinker and raw materials’ input prices, the firm has noted.

Uganda was further impacted by additional provisioning mainly on receivables. The net result of all these being that operating profit in Kenya remained flat compared to 2017 and declined in Uganda.

Cash generated from operating activities as Ksh3 billion (US$29.7 million) was lower than for prior year at Ksh5 billion (US$49.5 million), mainly on account of lower operating profit.

Uganda closed the year in a net borrowing position; while Kenya remained cash positive, the company’s financial indicate.

In the second half of 2018, the Group completed the first phase of the capacity expansion projects both in Kenya and Uganda, at a total cost of Ksh7.9 billion (US$78.2 million).

“These have put us in a strong position to leverage growth opportunities in our markets and to further solidify our market leadership position,” the management notes.

The market is expected to rebound in both countries in 2019 thigh fears remain on the export market mainly products to Rwanda from Uganda.

The group will continue to execute “Building for Growth” strategic agenda , while maintaining focus on cost of optimization in order to grow profitability and competitively.

The board has recommended payment of a final dividend of Ksh4.10 per ordinary share.

READ:Bamburi cement warns investors of profit slump in 2018

ALSO READ:Kenya, Uganda markets blamed for 66% drop in Bamburi cement’s profit

 

 

Martin Mwita is a business reporter based in Kenya. He covers equities, capital markets, trade and the East African Cooperation markets.

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