The largest manufacturer of cement in East Africa Bamburi Cement posted an 87.76 percent decline in net profit in the first half of the year ended June on the back of higher manufacturing costs.
The publicly-traded cement producer, which also has operations in Uganda said on Thursday its net income in the period dropped by Sh681 million to Sh95 million. The company had reported a net profit of Sh776 million in a similar period last year.
The reduced profitability was largely caused by operating costs increasing by Sh1.2 billion to Sh19.7 billion.
“Significant inflation of the fuel prices, logistics costs, and imported clinker prices in both Kenya and Uganda adversely impacted the operating profit,” Bamburi said in a statement.
“This was also adversely impacted by forex losses of the Kenya shilling and Uganda shilling against other major currencies.”
Its revenues increased by Sh505 million to Sh20.1 billion in the review period driven by an increase in volumes across both Uganda and Kenya.
“The board does not recommend the payment of an interim dividend for the financial year 2022,” the company said.
Other listed firms led by banks have also skipped interim dividend payouts despite posting double-digit growth in earnings.
The dividend freeze by the companies including KCB and Stanbic is seen as a response to rising economic uncertainties featuring several factors such as rising inflation and the disputed presidential election results.
Bamburi did not similarly pay an interim dividend last year but opted for a final dividend of Sh3.58 per ordinary share.
Going forward, Bamburi says it sees growth in cement demand this year after post-election jitters subside in Kenya and Uganda’s public infrastructure records growth.
It however warned the economic turmoil unleashed by the war in Ukraine could threaten its business.
“The Kenya cement market is expected to recover after the general elections while in Uganda cement demand is anticipated to be fueled by greater investment in public infrastructure, especially in the oil industry,” it said.
“However, the Global ongoing conflict is expected to have an adverse impact on the markets and especially on freight and imported raw material prices.”
Kenyan manufacturers have been grappling with higher raw-material costs, but are faced with the dilemma of fully passing them along to their customers.
Some manufacturers have opted to pass this cost to consumers by increasing the cost of some products as they strive to remain afloat.
“Manufacturers have been experiencing rising costs of production due to increased tax rates, shortage of dollars and increased cost of logistics due to supply chain challenges and world commodity prices,” the Kenya Association of Manufacturers (KAM) told the Business Daily earlier.