East African Portland Cement Company’s Pretax Profit Up 253% to Hit Sh377 million

By Eric Akasa

From left EAPCC MD Kephar Tande, Industrialisation, PS Cyrus Njiru (centre) and the company's chairman Mark Ole Karbolo peruse the results after the company announced a Sh377m pretax profit yesterday.

East African Portland Cement Company Monday announced a return to profitability , recording Sh377 million profit before tax for the six months ending December 31, 2012, up from a loss of Sh247 million the same period last year. The profit was realized from a Sh624 million turnaround in earnings, which represents an impressive growth of 253%.

While turnover dropped by 8% from Sh4.95 billions in 2011 to Sh4.54billions in the current period, gross profit margins increased to 30% from 18% previously on the back of cost-cutting, cost-management and forex gains.

According to Kephar Tande Managing Director East African Portland cement company, major improvements in production efficiencies resulted in savings of over Sh850m.  He said the drop in revenue was due to extended recovery of market share into the first quarter of the current financial year, following challenges experienced last year.

“Costs were well contained through stringent cost management and implementation of a new strategic plan,” said Tande at a media briefing. “Finance costs were impacted positively by the improved lending rates on the domestic market and this trend may continue toward the end of the current financial year.” He adds.

Earnings were also bolstered by a forex gain of Sh145m on its Yen-denominated loan, up from Sh74 million in the comparable period last year, as the shilling strengthened against the Yen.

Mr. Tande said the company had recovered its market share from 19% in July last year to the current 21% and targets to hit its pre-crisis level of 25% by the end of the current financial year. This will be achieved through increased marketing and distribution network as well as a push into new markets in Uganda and South Sudan.

He announced that EAPCC would enter the Tanzanian market in the second half after the country removed non-tariff barriers to trade. He added that the company is implementing a five-year strategic plan (2013-2016), which includes upgrading its kiln to boost production by 150,000 tonnes per annum, a new packaging line to improve turnaround of trucks, acquiring more reserves in Kitui and Kajiado as well as purchasing a new clinker and construction of a new grinding mill. This is expected to boost its market to 37% by 2016.

“Despite the growing competition,” he said, “there are opportunities for growth to meet the increasing local and regional demand for cement.”

The company exports 5% of its production annually and expects to boost that to 10% by 2014.

Chairman Mark Ole Karbolo said the company had put its problems behind and the new management’s strategy had begun to bear fruit.