Portland Cement nearly halves profit after asset valuation gain dips Sh1bn

East African Portland Cement Company (EAPCC) has announced a steep drop in net profit for the full-year ended June attributed to a Sh1 billion fall in the re-valuation gain of its assets.

The State-owned listed firm’s net profit for the financial year stood at Sh4.2 billion, representing a 42.1 per cent drop from the Sh7.2 billion it reported last year.

EAPCC, which has sought regulatory approval to publish its results past the October 31 deadline, says the fair value gain of its investment property now stands at Sh6.2 billion down from last year’s Sh7.3 billion.

The company’s investment property is now valued at Sh15.7 billion, up from the previous year’s Sh9.5 billion and Sh2.2 billion in 2014.

In the past financial year, they did not benefit from land sale proceeds as it did in 2015 when the government paid it Sh836.9 million for land acquired compulsory for the standard gauge railway project.

Additional negative hits came from total expenses which increased by Sh638 million to close at Sh3.25 billion while finance costs jumped 67.3 per cent to Sh618.1 million.

The company’s revenues for the period increased by 5.4 per cent to Sh8.9 billion but this improvement was then dampened by cost of sales which went up 692 million to Sh7.3 billion.

Portland’s drop in profitability would have been even more were it not for a tax credit of Sh411 million in the period, compared to a charge of Sh185 million it paid in the previous financial year.

The company’s swelling expenses saw it report a Sh1.6 billion loss from operations, up from the previous year’s Sh577.5 million, a pointer to the extent to which the assets revaluation helped the company.

READ: Portland seeks Cabinet nod to sell Sh10bn land

The dip in profit has seen the company extend shareholders’ dividend drought. “The directors do not recommend payment of a dividend in respect of the current financial year,” the cement firm said in a statement.

EAPCC reported a net loss of Sh531 million for the half-year ended December 2015 compared to an after-tax loss of Sh65.3 million a year earlier.

The firm, which has been loss-making for a while, was supposed to release financials by the end of last month but said that it has been granted an extension so that the numbers can be reviewed and approved by the Auditor General.

The Treasury owns 25 per cent of Portland and NSSF 27 per cent with Lafarge owning 41.7 per cent. This is not the first time that the company has delayed releasing its full-year financial.

In 2015, the company asked regulators for an extension in order for them to do a fresh review of its assets value.

EAPCC is not new to reporting and accounting problems, with the most notable one happening at the December 2013 annual general meeting when majority shareholders Treasury and the NSSF raised audit queries.

The stormy shareholders meeting saw the two top shareholders, with a combined 52 per cent stake, claim the company’s management had cooked its statement of accounts and that the firm was “in the red”.