Capital Markets

Carbacid set to gain from food industry growth

carbacid

The Carbacid factory based in Industrial Area, Nairobi. FILE PHOTO | NMG

Industrial gas producer Carbacid Investments has been tipped as a potential beneficiary of the current growth in the food and beverage industry which is set to increase demand for carbon dioxide as a preservative.

Stratlink Global, a research firm based in Nairobi, has predicted that the entry of global beer maker SABMiller and soft drinks producer Pepsi into the country and growing consumption of beer brands and flavoured juices will drive demand for carbon dioxide, which is the key product of  Carbacid.

READ: Pepsi switches on Nairobi soft drinks production plant

“Carbacid has benefited from increased demand for Co2 from food and beverage firms such as EABL, Coca Cola, and flavoured juice makers.

"A renewed interest of multi-nationals in the region such as SABMiller with their brewery in Tanzania has seen the regional market continue to grow, offering manufacturers new opportunities,” said the research firm in a report on East Africa’s food sector.

Last year Carbacid reported a net profit of Sh389 million, 28.8 per cent higher than the previous year’s Sh 302 million. The increase was attributed to rising demand for carbon dioxide, which accounts for about 90 per cent of its sales, lifting its revenues by 60 per cent to Sh921 million.

In Wednesday’s trading at the bourse, the company’s share price rose by 5.9 per cent to close at Sh125, with 400 shares changing hands.

Companies producing edible goods have been on a roll in the stock markets across East Africa, especially beer companies. Their performance is expected to grow, driven by demand from the middle class.

The report however notes that EABL is now operating its own carbon dioxide recovery unit, which is likely to reduce carbacid’s market share.