Bamburi Cement's net profit for the half year ended June declined by 7.4 percent to Sh88 million on the impact of millions of shillings used to settle a tax claim in Uganda.
The cement maker’s latest profit after tax was a decline from Sh95 million it posted in a similar period last year despite the turnover growing by 10.6 percent to Sh22.26 billion.
Pre-tax profit had grown five times from Sh124 million to Sh621 million but a higher tax burden condemned it to a decline in net income.
Taxation rose 18.4 times from Sh29 million to Sh533 million, amounting to 86 percent of the Sh621 million pre-tax earnings, highlighting its impact on the bottom line.
“Profit after tax was impacted by settlement of corporation tax matters in Uganda,” said the company in a commentary on the financial results.
Bamburi, which had last year been served with a demand for taxes totalling Sh956 million in Uganda where it operates through its subsidiary Hima Cement Limited, has not specified how much of this it settled.
In September 2020, the Uganda Revenue Authority (URA) commenced a review of Hima Cement Limited’s transfer pricing compliance for the financial years of 2014 to 2018.
The URA last December raised a corporation tax assessment with a principal tax of Sh594 million and interest of Sh362 million, which Bamburi objected to on February 10, 2023.
Bamburi was also by the end of December 2022 faced with Sh288 million in penalties and interest from the Kenya Revenue Authority. The KRA penalties arose from a tax assessment starting from 2007 to 2011.
It had applied for a waiver to the Treasury but this was declined on February 23 last year. The Nairobi Securities Exchange-listed firm said the review period also witnessed heightened inflationary pressures coupled with the depreciation of local currencies which impacted fuel, power and costs.
Operating costs went up by 11 percent to Sh21.8 million while finance costs —linked to servicing of loans— rose by 38.4 percent to Sh119 million.
“We are cognizant of the current challenging operating environment. Nonetheless, we remain steadfast in our efforts to drive positive performance in [second half] of 2023,” said the firm on the outlook.
The cement manufacturer is among a list of listed firms that have reported lower earnings in recent weeks.