We have extracted a chairman’s statement from the 2019 half year interim report of Bamburi Cement Limited (BAMB.ke), Listed on the Nairobi Securities Exchange
Overall, the Group’s turnover in the first half of 2019 remained flat on account of a contracted cement market in Kenya and further adversely impacted by significant drop in cement uptake by the SGR project compared to same time last year when Phase 2A was still underway. In addition, the Uganda operations were impacted by the continuing closure of the Uganda/Rwanda border, which has rendered the Rwanda market inaccessible.
The first half of the year was challenging with operating profit reducing to KES 0.3 billion from KES 1.2 billion. Higher depreciation charge following the commissioning of additional capacity expansion projects in both Kenya and Uganda mid last year impacted operating profit adversely. The 2018 comparator base did not have the impact of the incremental depreciation charge. Additionally, the difficulty in accessing the Rwanda market has not only led to loss off profit margin, but also to the need to impair associated assets in Rwanda.
Operationally, 2019 has been impacted by higher energy and logistics costs fuelled by higher than prior year power tariffs and increase in fuel prices over the same period last year.
The net impact of these being that the Group’s operating profit declined by 72% compared to first half of 2018.
Profit before tax declined to KES 0.2 billion from KES 0.7 billion mainly influenced by lower operating profit, increase in finance cost because of the long term loan taken in Uganda to finance capacity expansion, and the impairment of assets in Rwanda.
Net Comprehensive income after tax
Net comprehensive income after tax at KES 0.4 billion was however higher than 2018 at KES 0.3 billion thanks to the tax benefit from the capacity expansion projects commissioned in the previous year.
As a consequence, the earnings per share grew to KES 1.61 from KES 1.47 in 2018.
Cash flow Cash generated from operating activities at KES 1 billion was lower than same period prior year at KES 1.7 billion, mainly on account of lower operating profit. Uganda closed the first half of 2019 in a net borrowing position, while Kenya remained cash positive.
In the second half of 2019, the Group profitability is expected to progressively recover due to the topline growth and cost management initiatives despite the challenging environment. However, the impact of the difficulties experienced at the Uganda/Rwanda border is a downside risk and the Group hopes this matter will be resolved swiftly.
The Group will continue to execute the “Building for Growth” strategic agenda, while maintaining focus on cost optimisation in order to grow profitably and competitively.
The Board of Directors does not recommend payment of an interim dividend (KES 1.00/= per ordinary share paid in 2018).
By Order of the Board,
Dr. John P.N. Simba
Group Managing Director