East African Cables growth in operating profit was driven by increased sales in the regional market. File
Investment firm TransCentury got a major lift after East African Cables, where it has a majority stake, announced a dividend payment following a turnaround that saw the cable firm return to the profit zone in the first six months of the year.
The cable maker yesterday announced a profit of Sh172.3 million in the half compared to a loss of Sh56.9 million in the same period last year—helped by improved performance of its Tanzanian unit that was in losses last year.
This performance has seen the firm pay an interim dividend of Sh0.30 raising the prospect that the firm will pay a total dividend of more than one shilling—which it has been paying since 2008—this year.
This will earn TransCentury about Sh42 million for its 67 per cent stake in the cable firm from the half year performance on a day that the investment firm saw its share rise 14 per cent to Sh57 on its debut at the Nairobi Stock Exchange (NSE).
“The interim dividend indicates that the firm is confident of a strong growth in the second half that could see it breach the one shilling dividend it has been paying in the last three years,” said John Nderi, an analysts at Suntra Investment Bank.
Last year, the firm did not pay an interim divided but had a final payout of one shilling despite announcing a 38 per cent drop in profits for the year ended December 2010 due to poor performance of its Tanzanian unit and high metal prices.
Its Kenyan unit has been profitable save for its Tanzanian subsidiary that last year suffered from low sales to electricity supplier Tanzania Electric Company (Tanesco) and non-payment of deliveries that saw it write off debts.
On Thursday, the cable maker said that its Tanzanian business has made a turnaround, a recovery its says would see it post higher profits in 2011 given increased demand from the region’s vibrant construction sector and the push to connect more East Africans to the power grid.
“The growth in operating profit results was driven by increased sales in the regional market as well as recovery of our Tanzanian subsidiary,” said EAC in a statement.
“The current positive business trends are expected to continue,” added the cable firm. Its sales grew to Sh2.3 billion in this year’s first half compared to Sh1.8 billion in the same period a year ago.
Analysts expect the performance to lift its share at the NSE where it has shed 20 per cent in the past six months to stand at Sh12.55 apiece yesterday from Sh11.50 on Wednesday.
The outlook also means that EAC is set to reverse the trend that has seen it post reduced profits for the second year in a row, a departure from the double digit growth in profits witnessed since TransCentury bought a 75 per cent stake from investor Naushad Merali in 2003.
Profits dropped from Sh462 million in 2008 to Sh296 million in 2009.
