The Eveready brand of batteries. The company is set to establish a subsidiary that will speed up its diversification from the battery market and halt falling sales. Photo/PAUL WAWERU
Eveready East Africa is set to establish a subsidiary that will speed up its diversification from the battery market and halt falling sales. The subsidiary will be known as Flamingo Properties Ltd and the battery firm plans to seek shareholder approval for its establishment during its AGM on August 9, according to a notice on the shareholder meeting.
Jackson Mutua, CEO of Eveready, said the company will use the new unit to penetrate businesses that do not form part of its core business. “We will use it as a vehicle to diversify our business further to products outside our core business,” he said.
“The notice is for shareholder approval and we cannot provide details at this stage. If we feel Eveready can get returns in real estate we will go there,” added Mr Mutua in a telephone interview with the Business Daily.
In its annual report, the firm says its core business is “the manufacture and sale of Eveready dry cells “D” size batteries in East Africa and trading in an assortment of imported Eveready and Energizer flashlights and batteries, and Schick razors and accessories.”
The battery firm has seen a consistent decline in sales volumes and profitability in the last five years, owing to a shift towards electricity powered gadgets as more Kenyans get connected to the national power grid.
Cut-throat competition from cheap imports, mostly from China, and new entrants has also continued to pile pressure on the Nakuru-based firm.
Its annual revenues have dropped from Sh2.3 billion in 2005 to Sh1.3 billion last year while annual profits have dropped from Sh186 million to a loss of Sh123 million in 2011.
It returned to profitability in the six months to March on exchange rate gain as the shilling strengthened against major world currencies. Its half-year net profit stood at Sh44.4 million compared to a loss of Sh53.9 million in same period last year as its sales grew to Sh714 million from Sh659 million in the period under review.
The company earned Sh64 million in foreign exchange gains following the revaluation of its foreign currency denominated reserves. Eveready is now marketing grooming products such as shaving razors, blades, and accessories under the Schick brand and distributing flashlights in a new scheme aimed at generating more revenue.
It is also plotting to enter the solar market with products for domestic lighting and is betting on Flamingo Properties Ltd to further reduce its reliance on dry cell batteries, which account for about 90 per cent of its sales.
Sold assets
The company has shed hundreds of jobs in recent years and sold assets, including houses and cars, to boost its cash position and profitability. “Production is now closely matched to demand and these actions unfortunately resulted in a further 74 person reduction in our production facility,” says Eveready in its 2011 Annual report.
Investors at the Nairobi Securities Exchange -- where the firm debuted in 2006 -- have taken note of its poor show as the share has lost 15 per cent in the past year to trade at Sh1.70, which is below the IPO price of Sh9.50. The company has never has paid dividends since it was listed at the Nairobi Securities Exchange.
