How Carbacid turned around carbon dioxide business

The Carbacid factory based in Industrial Area, Nairobi. FILE PHOTO | NMG

Carbacid is reaping big from its regional expansion and positioning as a supplier of pure carbon dioxide, with the firm posting record sales and net income in the year ended July.

Until the sharp recovery that started in 2020 amid Covid-19 pandemic, the company’s sales of the gas had been in decline from the previous peak of Sh952.8 million in 2013.

Carbacid faced stiff competition from alcohol makers who harness carbon dioxide as a byproduct.

In response to falling sales, the firm expanded into new markets and sought to differentiate itself as a supplier of pure carbon dioxide sourced from naturally occurring underground reserves.

The strategy helped it set new sales, earnings, and dividend records in the year ended July according to the results published yesterday.

Revenues surged 56 percent to Sh1.4 billion, up from Sh906.5 million a year earlier. This saw the net profit grow 70.4 percent to Sh707.6 million as the company largely protected its margins despite rising costs of operations.

“The board is pleased to note that entry into new markets and new regions has helped increase sales during the year. This is driven by the group’s delivery promise and the highest quality product,” the Nairobi Securities Exchange-listed firm said in its latest annual report.

“With one of the largest quality production capacities in the region and a large delivery fleet of cryogenic tankers, Carbacid is able to meet customer requirements on time and in full. Carbacid continues to upgrade its assets and capabilities, are well placed to positively differentiate its services from competitors.”

The company supplies carbon dioxide to clients in the local market as well as in Uganda, Tanzania, Rwanda, Burundi, Ethiopia, Uganda, Zambia, Southern Sudan, and Somaliland.

Carbacid says its carbon dioxide is free from an alcohol base, a particular requirement of a large segment of the market for ethical reasons. Carbon dioxide is used to carbonate soft drinks, wine, and beer. In solid form, it is used as dry ice in the refrigeration of foodstuffs like ice cream and meat products.

Food and beverage firms use gas as a preservative or to enhance their products. A positive side effect of Carbacid’s regional expansion is a major increase in revenue from transport services, with the company operating a fleet of trucks that deliver the gas in liquid form.

Its transport revenue nearly doubled to Sh459.8 million in the period from Sh244.2 million a year, accounting for about a third of total sales.

In light of the improved performance, Carbacid declared a dividend of Sh1.7 per share or a total of Sh433.2 million. This topped the prior year’s payout of Sh1.6 per share or an aggregate of Sh407.7 million.

It marks a higher payout ratio –at 61.2 percent of net income— compared to the previous years when the company maintained a distribution of Sh0.7 per share as it battled uncertainty in the carbon dioxide trade which is its most important business.

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