Industry

Eveready mulls shutdown of Kenyan plant

battery

Eveready factory in Nakuru. Rising raw material costs , especially zinc, has contributed to the company’s poor performance.

Battery manufacturer Eveready East Africa is considering shutting down its Kenyan plant in Nakuru in a cost-cutting move that could see 170 employees lose their jobs.

Mr Jackson Mutua, the firm’s new chief executive, said “cheap” battery imports from Asia had eroded the company’s market share, making it difficult to compete locally.

“We are considering outsourcing our manufacturing and our aim is to get cheaper imports” said Mr Mutua. “We could outsource elsewhere in Africa or in Asian markets where operating costs are lower.”

Mr Mutua takes office next month following the exit of Mr Steve Smith.

He said three previous rounds of retrenchments in recent years have not cut costs to a level where the company can remain a viable ongoing concern.

Eveready has trimmed its factory staff as lower cost battery imports eroded its sales, eating into its profits.

Last year, the firm retrenched 74 employees, following up with 26 other lay-offs in 2009 and 130 in 2008.

Mr Mutua however said restructuring the Kenyan plant could make the company viable.

The intention to close Eveready Kenya’s plant signals the difficulty consumer goods manufacturers are facing in the local market as stiff competition erodes profit margins amid surging costs of raw materials and stiff competition by lower-cost manufacturers especially in Asia which has better infrastructure. Multinationals such as Reckitt Benckiser, Procter and Gamble and Colgate Palmolive are among companies that have closed their Kenyan factories, opting to serve the local market by importing from low cost manufacturing hubs.

Eveready’s plant is one of the largest battery factories in Africa with a capacity of over 150 million units annually but Mr Mutua said it is currently utilising just one-third of this capacity due to low sales.

The firm is also set to venture into new business lines to reduce its exposure to the risk of declining battery sales.

“We shall in the next few months introduce new products in the market that will protect us from the threat in the battery market,” Mr Mutua said declining however to disclose the new products.

Analysts said shutting down the Kenyan factory could help Eveready reverse its dwindling fortunes.

“Outsourcing makes sense because the cost of manufacturing in Kenya is high, driven by high labour and energy costs,” said Renaldo D’Souza, an analyst at Genghis Capital.

“But the key to Eveready’s turnaround lies in what new business lines they want to go into,” he said, adding that failure by the government to eradicate battery counterfeits continues to weigh down on the firm.

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