Companies

TransCentury issues profit warning over RVR sale

TransCentury expects more than a 25 per cent dip in profit for the current financial year due to a fair value loss from the sale of its stake in Rift Valley Railways, it said Wednesday, sending its shares 7 per cent lower.

The company said in a statement its sale of a 34 per cent stake in RVR would erode its profit by a quarter for the year ending December 2014.

On Tuesday, TransCentury posted 15.5 per cent drop in its net profit for 2013 to Sh626 million from Sh741m a year earlier.

The company's stock was down 7.41 per cent to Sh25 by 0817 GMT on the lower 2013 earnings as well as the profit warning, said Ian Gachichio research analyst at Kestrel Capital.

"In this market, lower earnings almost always coincides with a decline in share price. We have the lower-than-expected 2013 profits and also the profit warnings," Mr Gachichio said.

The company, which runs an electricity equipment maker and an engineering services firm active in the nascent petroleum and mining sectors in Kenya, sold its 34 per cent stake in RVR to Egyptian private equity firm Citadel Capital in March.

READ: TransCentury sells railways stake to Egyptians

The $43.7 million received from the sale meant TransCentury had recovered its entire cash investment in RVR, but the proceeds were below the historical fair value of the investment.

The company said it would redeploy the cash realised from the disposal of RVR towards other higher return investment opportunities.

RVR, operator of the sole rail line linking Kenya's Indian Ocean coast with Uganda, is set to face competition from a new railway in the coming years after the Kenyan government broke ground on building a standard-gauge line from the port city of Mombasa to the Ugandan border in November last year.

Additional Reporting by BD Reporter