Kenya: confidence running high for East African Portland Cement

Investors in East African Portland Cement Company saw the cement manufacturer’s share price rally to a 12-month high at the end of trading on Friday. Shareholders hope that the company will post a profit in the full-year period ending 31June.

Local analysts confirm that confidence is returning and investors can expect the cement maker to post a profit in the full-year period, having previously been in the loss-making territory.

“There’s expectation of good performance and better turnover by the cement maker,” said Suntra Investment Bank analyst Johnson Nderi.

In the first half year ended December 2012, the cement manufacturer reported a profit-after-tax of KES327m (US$3.8m) from a loss of KES376m in a similar period a year earlier.

After the release of its half-year results, analysts said the company is still struggling to regain its market share after missteps in its strategic plan and a breakdown in corporate governance saw it lose its share to rivals ARM Cement Ltd and Bamburi Cement.

The East African Portland Cement Company (EAPCC) was affected by operational challenges following a plant breakdown and disruption of operations in January last year as staff went on strike.

Boardroom wrangles at the cement maker also saw the Capital Markets Authority suspend EAPCC from trading at the Nairobi Securities Exchange in 2012 to protect shareholders from accruing losses that could arise from a dip in its share price.

The coming on-board of new manufacturers, including Savannah Cement, and an influx of cheap cement from countries such as India and Egypt has intensified competition and is further poised to shrink profit margins in the sector.

“The company is now focussing on a strategic plan to enable it to regain market share and enhance its competitive position. It intends to rework its distribution channels to sustain the profitability momentum for the rest of the financial year,” Standard Investment Bank analysts noted in an earlier report.

Analysts also say the rising cement consumption outlook in Kenya and the East African region has provided support to the counter.

The 2013 Economic Survey in Kenya indicated that the building and construction industry recorded a 4.8 per cent growth in 2012 compared to 4.3 per cent in 2011. However, Kenyan cement consumption rose marginally by 1.7 per cent 3.93Mt in 2012 compared to 3.87Mt consumed in 2011.