From left, Car & General managing director Vijay Gidoomal, Cummins regional director B.S Balajion and CEO Tom Linebarger (R) on a recent tour of the Car & General headquarters. PHOTO | COURTESY
Car & General (C&G) is set to lose half of its business distributing Cummins’ engines and generators after the Netherlands-based manufacturer moved to take a 50 per cent stake in the local franchise.
The Nairobi Securities Exchange-listed firm has been selling the products in East Africa on its own but will now form a 50:50 joint distributorship venture with Cummins which, wants a piece of the business.
Sale of Cummins products, which include diesel engines, turbochargers, alternators and generators, accounted for 30 per cent of C&G’s Sh9.9 billion total sales in the year ended September 2015.
It is the mainstay of C&G’s equipment business which includes distribution of Kubota tractors and Toyota forklifts.
“The joint venture will take over the full-line distributor business from C&G, Cummins’ current distributor in East Africa,” C&G said in a statement.
The listed firm, whose business spans poultry farming and real estate, was appointed Cummins’ distributor in 2006.
Revenues from the Cummins’ business had hit $30 million (Sh3 billion) last year, leading sales of equipment whose total in the period stood at Sh9.6 billion.
C&G’s poultry business raked in Sh199 million while income from investment properties was Sh65.8 million.
The company made a net profit of Sh127.1 million in the year ended September 2015, down from Sh278.3 million the year before on the effect of higher costs and forex losses.
“The shareholders of Car & General (K) Limited and the public are advised to exercise caution when dealing in the shares of the company,” added the statement.
The company did not give details of the proposed transaction, including the amounts to be invested in the joint venture or whether it would receive compensation from Cummins for dilution of its distribution business.
The joint venture, dubbed Cummins C&G Holdings Limited, will start operations early next year. The move comes after the company said it was facing increased competition from rival equipment manufacturers and dealers.
“The Cummins business in Kenya and regionally is growing. Our challenge remains the entry of competition from all over the world and our ability to differentiate ourselves,” the company said in its latest annual report.
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