Lower revenues recorded during the financial year to June has seen East African Portland Cement Company (EAPCC) #ticker:PORT slip into the red, posting a net loss of Sh1.5 billion for the year to June compared to a Sh4.1 billion net profit last year.
The cement maker says its sales during the period under review fell 22 per cent to Sh6.9 billion following “production challenges and downward pressure on retail prices due to excess supply.”
Portland however managed to cut its administrative expenses to Sh2.28 billion from Sh3.25 billion, with management attributing this to one off inventory adjustment charge and cost management initiatives undertaken during the year.
The NSE-listed firm has in the past seen its business come under severe pressure, not only from increasing competition in the sector but more so from corruption allegations among its employees.
“The growth of the construction industry is strong with cement demand expected to remain high driven by infrastructural projects and growing real estate sector,” the firm said in a statement.
“However, due to the current excess capacity that exceeds demand, the downward pressure on cement prices is expected to prevail in the short to medium term.”
EAPCC closed the year to June with total assets of Sh27.4 billion, representing a marginal drop from the Sh27.8 billion it closed at during a similar review period in 2016. The firm’s finance costs also remained relatively the same at Sh617 million.
The cement maker recorded foreign exchange gains of Sh134 million in the year to June compared to a loss of Sh305.7 million made during a similar period last year.
During the period, Portland’s gain on investment properties depreciated from Sh6.2 billion to Sh84 million as a result of completion of the Standard Gauge Railway (SGR) project.
“Our intention is to shore up sales volumes going forward to stabilize our revenues and curb further losses,” said Simon Peter Ole Nkeri, the firm’s managing director, said in a statement.
“We are confident that the initiatives we have embarked on in the second-half of the year to stabilise operations to ensure efficient product availability, as well as the reconfiguration of distribution systems and sales channels to respond to customer needs, will bear good results,” he added.