Car & General profit falls 23pc on weak shilling, costs

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

Car & General net profit for the financial year ended September 2022 dropped 23 percent to Sh679.46 million on the back of higher debt servicing and goods clearance costs.

The drop in net profit was from the record Sh887.2 million earnings for the preceding similar period when the firm quadrupled dividends and gave shareholders bonus shares of one for each share held.

The firm, which deals in a range of power generation, engineering and automotive products, including motorcycles and tuk-tuks (three-wheelers), says the drop in profit was due to Sh301 million foreign exchange losses and Sh139 million demurrage costs linked to logistical issues.

“The Russian invasion of Ukraine in February 2022 brought a host of unforeseeable challenges, including significant inflation, exchange rate fluctuations, dollar shortages and logistic challenges,” said the firm.

The drop in profits saw the firm halve the dividend to Sh0.80 per share, amounting to Sh64.17 million compared with the previous year’s Sh128.33 million of Sh1.60 per share.

Paul Wanderi Ndung’u, the single largest individual shareholder with an eight percent stake, will pocket Sh5.13 million when dividends are paid by March 23.

Car & General said Kenya and Tanzania trading operations suffered significant storage and demurrage charges during clearing processes due to logistical and motorcycle localisation challenges.

The firm’s report shows that it closed the financial year with Sh7.12 billion, of which 66 percent or Sh4.72 billion was dollar-denominated, thereby exposing it to increased repayment costs as the shilling continued to slide against the US currency.

At Sh7.12 billion, the loan jumped by 44 percent from Sh4.94 billion, with Sh5.12 billion being classified as import loans. The firm repaid Sh1.05 billion and borrowed Sh889 million during the year.

The Russia-Ukraine war, added to the August general election, saw sales in Kenya drop by five percent as those outside the country increased by 48 percent. Uganda and Tanzania accounted for 45 percent of group sales.

“Our two-wheeler (bodaboda) business in Kenya was most affected, with volumes dropping almost 50 percent. Our equipment businesses (namely tractors, construction equipment and forklifts) remained stable and grew marginally,” said the firm.

Its cash flow position was negatively impacted by lower sales in Kenya and the supply chain issues in Kenya and Tanzania, resulting in higher levels of paid-up stock to the tune of Sh1.9 billion.

The firm sees business uncertainty persisting in 2023, particularly with regard to the inflationary impact and the continual devaluation of the Kenyan shilling.

However, the board hopes to ride on the diverse business lines— automotive and equipment distribution, real estate investment, financial services, poultry and helmet manufacturing— for resilience and growth.

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