Companies

Eveready discloses Energizer deal accounts for 80pc of sales

mutua

Eveready East Africa chief executive Jackson Mutua. PHOTO | FILE

Energizer International products account for 80 per cent of the Nairobi Securities Exchange-listed Eveready East Africa’s total sales, the company disclosed Tuesday, indicating the huge importance of ongoing negotiations to renew the current distributorship agreement.

The distribution agreement for Energizer products such as flashlights, batteries and Schick razors ended last month, prompting the new discussions.

“We have an offer on the table. We are, however, opposed to some of the clauses,” chief executive Jackson Mutua said in an interview.

Retaining the distribution deal is important for the company which could see its sales fall by a large margin if the agreement is not renewed.

Eveready said it would ensure it customers are well supplied with Energizer’s products even as the talks continue.

Mr Mutua said while Eveready is keen to renew the agreement, the company has in recent years moved to diversify its business by taking on the distributorship of other products including Clorox bleach and Turbo car batteries.

He added that Energizer’s 10.5 per cent stake in Eveready is an independent investment that is not tied to the parties’ distribution deal which is the latest transformation of the partnership.

The company was initially set up to manufacture Energizer’s battery brands under licence but intense competition and increased electrification led to the closure of the firm’s plant in Nakuru in 2014.

This saw Eveready transform into a distributor, importing products including batteries from Energizer and other markets to sell in the regional market.

The 18.5-acre land on which the closed factory sits is expected to be sold for Sh1.2 billion, generating a large gain that the company says will partly be used to pay its first dividend in eight years.

The payout, expected next year or in 2018, will end the dividend drought that started in the year ended September 2008.

READ: Expiry of Energizer deal signals new woes for Eveready

Eveready last paid a dividend of Sh0.45 per share for the year ended September 2007, with losses in most of the subsequent years leaving shareholders without dividends.

The dividend drought has been compounded by a long-term decline in the firm’s share price to the current Sh2.75, representing a capital loss of 71 per cent compared to the listing price of Sh9.5.

Sale of the land came after plans to venture into real estate development with strategic partners collapsed, with the company saying the idle land is incurring maintenance costs at a time when it has a heavy debt burden.

It said the land did not meet “the threshold of investment for a mixed-use development as anticipated for the area”.

Sale of the land, which accounts for 46 per cent of Eveready’s total assets, is expected to be completed in the current financial year that ends in September 2017.

The transaction will boost Eveready’s performance in the period which had already showed a loss of Sh58.9 million in the half year ended March compared to a net loss of Sh12.4 million the year before.

This came as sales halved to Sh300 million from Sh602.8 million which the company attributed to disruptions in supply of carbon zinc and alkaline batteries.