On Tuesday, Centum announced a 1.5 per cent growth in net profit to Sh805.6 million in the six months to September as rising interest cost hit income lifted by the recovery of the Nairobi bourse.
The NSE-20 share index has rebounded this year gaining 29.5 per cent thanks to strong growth mainly in banking stocks.
Centum’s portfolio of more than Sh15 billion is invested across asset classes, from companies like UAP Insurance, Longhorn and General Motors to prime residential land in Nairobi to unlisted firms.
Investment firm Centum has revealed that it bought additional shares in Coca-Cola franchises worth Sh442 million ahead of warning that a court case involving the bottling firms might hurt its earnings.
Details in the firm’s half-year report indicate that its investments in associate companies increased to Sh4.05 billion in September from Sh3.61 billion in March — which Centum attributed to new share purchase in the bottling companies.
“We split the investment across the four companies when we saw an opportunity to increase our stakes,” James Mworia, the CEO of Centum Investment told the Business Daily.
The Sh442 million was spread across the four bottling firms Mount Kenya Bottlers, Rift Valley Bottlers, Nairobi Bottlers, and Kisii Bottlers.
The deal was concluded between March and September, meaning it was closed before the November 2 cautionary statement that its earnings might be hit by a court case involving the four Coca-Cola bottling companies. The companies are required to pay Kenya Revenue Authority Sh5.6 billion in taxes after ignoring a review of taxation laws that required soft drink makers to pay excise duty on costs incurred during cleaning of returned bottles.
The firm owns 27.8 per cent of Mount Kenya bottlers, Rift Valley Bottlers (43.99pc), Kisii Bottlers (23.89pc) and a 27.62 per cent stake in Nairobi Bottlers — which it says accounts for half of Coca-Cola branded sodas sold in the Kenyan market.
Centum’s shares in the four Coca- Cola bottling companies represented 28 per cent of its assets, contributed 20 per cent of its profit and two per cent of the cash flow in the year to March.
The four franchises moved to court in May last year and argued that the bottles belong to them and the cost of washing and sanitising containers cannot be subjected to tax since they are never sold. They lost the court battle on October 29 and plan to appeal and have obtained orders maintaining the status quo.
“Should the appeal fail both at the Court of Appeal and the Supreme Court, the outcome is likely to adversely impact the solvency of the four bottling companies and as a result negatively impact on Centum’s performance,” said Centum in the November 2 cautionary statement.
The alert comes at a time production of soft drinks in the half year to June dropped for the first time in four years from 189.7 million litres to 187.9 million in a similar half last year.
On Tuesday, Centum announced a 1.5 per cent growth in net profit to Sh805.6 million in the six months to September as rising interest cost hit income lifted by the recovery of the Nairobi bourse.
The fair value gain in quoted investments rose to Sh275.6 million in the six months compared to a loss of Sh338.9 million, which lifted its investment income to Sh947 million compared to Sh386 million in a similar period a year earlier.
The NSE-20 share index has rebounded this year gaining 29.5 per cent thanks to strong growth mainly in banking stocks.
Centum’s portfolio of more than Sh15 billion is invested across asset classes, from companies like UAP Insurance, Longhorn and General Motors to prime residential land in Nairobi to unlisted firms.
