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Bamburi cuts dividend payout by half as net profit dips 36pc

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A section of Bamburi cement factory in Mombasa. FILE PHOTO | NMG

Cement manufacturer Bamburi #ticker:BAMB has more than halved interim dividend payout to shareholders after it suffered a 36.21 per cent dip in half-year net profit for the period ended June 30.

The firm, listed on the Nairobi Securities Exchange #ticker:NSE , attributed the profit drop to low demand from a softening construction industry and weak prices due to fierce competition by producers.

The giant cement maker yesterday announced a net income of Sh1.85 billion in the six-month, down from Sh2.90 billion in the same period last year. This was on the back of a Sh1.57 billion decline in revenue to Sh17.54 billion from Sh19.11 billion attributed to a slowdown in construction activity ahead of the August 8 polls.

Shareholders will get Sh2.50 interim dividend per share, 58.83 per cent less than the firm paid 12 months ago.

Bamburi also owns Hima Cement Ltd in neighbouring Uganda.

The company blamed the drop in sales on reduced private sector investment, especially in individual home builder segment, delays in some infrastructure projects and drought conditions which have persisted since the last quarter of 2016.

The Ugandan business, however, “enjoyed good market conditions”, posting “good performance” in domestic and export sales in the review period, Bamburi said.

France’s conglomerate Larfage controls 58.6 per cent of the cement maker.

READ: Cement production, use fall in first half

The firm kept a tight lid on operating costs which were flat, declining 0.53 per cent to Sh14.88 billion.

“While the underlying business remains solid in Kenya, the market faced softening demand,” managing director Bruno Pescheux said in a statement.

The firm, nonetheless, sees construction activity picking up from October when a new government is expected to have been sworn into office if the Supreme Court throws out the ongoing presidential petition by the Opposition, the National Super Alliance. The seven-judge bench is constitutionally required to deliver its verdict next week.

“We expect the Kenyan market will rebound in the last quarter (October-December) while the Ugandan market is expected to continue performing well in line with the projected growth in both the domestic and regional markets,” Pescheux said.

The country’s largest cement maker by market share is expanding grinding capacity at its Athi River plant and in Uganda by 1.8 million tonnes, a project it started in January and is set for completion mid-next year.

Bamburi said increased capacity will “solidify” its position as the lowest cost producer in the region, giving it a pricing edge over competitors.

“Though 1H17 (half-year 2017) performance has set the stage for revising FY17 (full-year) downwards, we do not see any immediate spill-over risk to our medium-term forecasts,” Standard Investment Bank said in a note to investors. “In addition, we expect Bamburi’s cash-rich position, compared to highly geared competitors, to offer downward protection against soft cement demand and intense competition.”

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