Bamburi Cement profit flat at Sh5.89bn on tight competition

Cement maker Bamburi Group has reported flat growth in its after-tax profit, citing falling demand in domestic and regional markets as well as rising competition.

The Nairobi Securities Exchange-listed company recorded a profit after tax of Sh5.89 billion for the year ended December 2016, a 0.3 per cent rise over the profit recorded during a similar period last year. The company’s turnover fell to Sh38 billion from Sh39.2 billion in 2015.

Bamburi said the group had suffered due to lower demand for its products, despite having implemented cost-management measures in Uganda and Kenya.

“Overall, there was a marginal reduction in volumes into inland Africa export markets and intense competition particularly in the individual home-builder segment impacting prices in some markets,” the firm said.

However, Bamburi reaped the benefits of mega infrastructural projects in the region with rising demand from this market segment in Kenya, Uganda and Rwanda.

Bamburi shareholders are set to get a final dividend of Sh6 per share, bringing the total 2016 payout to shareholders to Sh12 per share.

In 2015 Bamburi shareholders took home Sh13 per share. Bamburi says it will focus on innovation to grow profitability. The Group is also planning to increase capacity in both Uganda and Kenya in projects that will be completed next year.

East African cement firms are going through tough times. Data from the Kenya National Bureau of Statistics (KNBS) indicates reduced cement demand from housing and construction sectors.

According to the figures, as of the third quarter of 2016, year on year growth of cement construction fell to 5.3 per cent from 11.5 per cent in 2015.

Companies in the sector have been warned that continued expansion despite this bleak outlook could lead to idle capacity.

Currently, the estimated plant utilisation rate is 61.7 per cent. However, Dyer & Blair Investment Bank predicts that this will fall to 45.4 per cent in 2018.

Kenya accounts for 53.2 per cent of the 21.1 million tonne installed capacity in East Africa. Savannah Cement also plans to increase its capacity while Indian firm Cemtech Sanghi is expected to build a 1.2 million tonnes plant in West Pokot.

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