Bamburi Cement uncertain on 2012 outlook

Bamburi Cement uncertain on 2012 outlook
27 February 2012

Bamburi Cement, a unit of Lafarge, reported a 28 per cent rise in 2011 turnover supported by sales from its Ugandan unit but warns its performance this year could be affected by inflation and uncertain political outlook in the lead-up to Kenya's elections.

The company earned a pre-tax profit of KES8.47bn at the end of 2011 from KES7.56bn in 2010. East Africa's largest cement maker had seen a 7.4 per cent decline in profits in 2010 compared to 2009.

The group's turnover increased by 28 per cent to KES35.9bn from KES28bn. Given pricing pressure in its main market of Kenya, the revenue growth was mainly supported by increased volume sales from its recently-expanded Ugandan subsidiary and currency gains from its exports.

"The year was also characterised by stable domestic prices and better export prices, due to the appreciation of the US dollar," Hussein Mansi, Bamburi managing director, said.

Operating profit increased by nine per cent to KES7.9bn. After two consecutive years of posting improved margins its operating margins declined last year.

According to Standard Investment Bank analysts, reduced margin was likely as a result of high energy costs (linked to rises in local power costs), increase in distribution expenses due to higher cement exports, rises in depreciation expenses following the completion of expansion projects and negative currency impacts on cost of imported coal and clinker. "On margins, while we expect inflationary and currency volatility to remain a challenge, we expect some margin improvement as Bamburi maintains its energy substitution initiatives and reaps from on-going reforms in product distribution," said Standard Investment.

On its outlook for 2012, Bamburi Cement said: "While early positive signs are starting to develop in the United States economy, sovereign debt concerns in the Eurozone, political instability in the Middle East, cost inflation in developing markets, and uncertain political environment in Kenya continue to make visibility difficult," it said in a statement.

Inflation rates have been coming down both in Kenya and Uganda but still remain in double-digit territory while food and fuel prices also remain high. Meanwhile, Kenya is due to hold a general election by latest March next year, the first national poll after violence erupted following a disputed election in 2007.

Published under Cement News