British currency printer De La Rue’s Kenyan subsidiary recorded a 58 per cent drop in profit for the six months to September 2022, signalling a fall in the share of profits this year for the National Treasury which holds a 40 per cent stake in the unit.
The UK firm operates locally through its subsidiary De La Rue Kenya EPZ Limited, which for the half-year period reported a profit of £0.5 million (Sh74 million), down from £1.2 million (Sh177.5 million) in the corresponding period last year.
The Kenyan government acquired a 40 per cent stake in the local unit in April 2019 for £5 million (Sh739.5 million) in a bid to share in the profits the company makes from the State’s currency printing contracts.
In the full year ended March 2022, the National Treasury’s earnings from the joint venture stood at £0.9 million (Sh133 million), derived from the unit’s profit of £2.2 million (Sh325.4 million).
Revenue from the subsidiary fell from £15.1 million (Sh2.23 billion) to £10.8 million (Sh1.6 billion), in line with a general decline in the parent’s earnings on the back of reduced demand for bank notes globally, amid supply chain constraints that added to costs.
“We witnessed a post-Covid-19 lull in demand, with banknote volumes significantly down, a trend that was seen across the banknote printing market,” said De La Rue Plc in its financial reports for the period.
De La Rue said in its results update that its customers have been using up the stock of banknotes built up during the Covid-19 pandemic when economies such as Kenya cut back on the use of physical money in favour of digital transactions to minimize the spread of the virus.
Many economies also imposed lockdowns and other restrictions that reduced the volume of trade and transactions, resulting in slower usage and replacement of bank notes.
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The Kenya plant in Ruaraka, which was set up in 1991, produces banknotes circulated in more than 30 countries, as well as security documents such as passports and bank cheques.
Looking forward, De La Rue said it expects the high global inflation to revive bank note demand as consumers utilise more money to cover for the increased cost of goods and services.