Car & General issues profit warning on climbing costs

Equipment on sale at a Car & General shop. FILE PHOTO | POOL

Diversified trading firm Car & General (C&G) has issued a profit warning for the 15 months ending December, preparing investors for an earnings decline of at least 25 percent.

The listed firm had already posted a major profit plunge in the half-year to March due to higher costs.

C&G changed its financial year end to December from September, meaning that it will report results for 15 months to the end of this year before normalising to the standard 12 months.

The company had posted a net income of Sh679.4 million in the year ended September 2022. It subsequently reported a net profit of Sh96.6 million in the six months to March, representing a decline of 84.6 percent from Sh629.3 million a year earlier and setting the stage for the profit warning.

“The board of directors ... wishes to inform the shareholders of the company, potential investors and the general public that based on the assessment of the unaudited consolidated accounts for the period to 30th September 2023, the earnings for the fifteen months ending 31st December 2023 of the group are expected to decrease by more than 25 percent in comparison to the prior year,” C&G said in a notice.

“The drop in the group's performance is mainly attributed to a combination of factors including, foreign exchange losses on US$ exposures resulting from a significant strengthening of US$; a deterioration of unit economics of motorcycles which hurt motorcycle sales in Kenya; an increase in finance costs; and demurrage costs in Tanzania.”

The company has been on an expansion drive in recent years, opening a helmet manufacturing plant last year. Its other operations include real estate, consumer credit, motorcycles and tuk-tuks (three wheelers).

In July, the Competition Authority of Kenya approved C&G's proposed re-acquisition of a 50 percent stake in diesel engine distributor Cummins C&G Limited that it had ceded in 2017.

C&G earlier sold its stake in Cummins CG to the franchise US owner Cummins Inc in 2017, fetching Sh412 million, to form the joint venture.

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