We have extracted the financial summary from the interim half year report of East African Portland Cement Company Limited listed on the Nairobi Securities Exchange under the share code PORT.ke. East African Portland Cement is a cement manufacturer and distributor for the building and construction sectors in East Africa.
The following is an excerpt from the interim half year report;
The first half of the year reflected a difficult business environment on the backdrop of increased input prices, a sluggish market as well as production challenges arising from a tight EAPC PLC working capital position. This affected the ability of the company to effectively provide the product sufficiently to all its customers. Consequently, sales revenue declined by 55% over the same period in the prior year leading to an increase of 66% in loss from operating activities. The Company expects to continue reaping from reductions in administrative expenses driven by the ongoing staff rationalization and outsourcing of non – core administrative services.
Finance costs declined by 53% owing to restructuring of financing facilities. The current liabilities exceeded current assets by Kshs 7.3 billion (June 2018 Kshs 6 billion). The board is aggressively pursuing balance sheet restructuring to effectively address the negative working capital. Relevant consultations and approvals to recapitalize the business have been obtained.
Future market outlook remains positive with the unveiling of the Big Four Agenda by the National Government where affordable housing and manufacturing were among the top priorities. The competitive environment is expected to result in subdued cement prices in the near future. Revenue enhancement and cost optimization will therefore remain key focus objectives as the Company continues to leverage on its brand to weather competitive pressure. Despite the depressed results, the Board remains confident in realization of its turnaround efforts and takes cognizance of Government support in concretizing initiatives in sourcing for working capital. The Company is further reorganizing its strategy and structure to reengineer the business in order to improve performance, cost rationalization and efficiency. This is geared towards reduction of the high Finance and Administrative costs and stabilization of the value chain processes in order to enhance efficiency and ultimately the Company’s competitive position.
The Board is optimistic that with the implementation of the Company’s medium term plan, the Company will return back to profitability.