Cement maker Bamburi Group has reported horizontal growth in its after-tax profit, citing falling demand in domestic and regional markets as well as rising competition.
The Nairobi Securities Exchange-listed company recorded a profit after tax of $57m for the year ended December 2016, a 0.3 per cent rise over the profit recorded during a similar period last year. The company’s turnover fell to $368m from $380m in 2015.
Bamburi said the group attributed its losses to a decrease in demand for its products, despite having implemented cost-management measures in Uganda and Kenya.
The firm also noted a marginal reduction in volumes into inland Africa export markets and intense competition particularly in the individual home-builder segment impaling prices in some markets.
However, Bamburi reaped the benefits of mega infrastructural projects in the region with rising demand from this market segment in Kenya, Uganda and Rwanda.
Bamburi plans to focus on innovation to grow profitability. The Group is also planning to increase capacity in both Uganda and Kenya in projects that will be completed next year.
East African cement firms are going through tough times, as indicated by data from the Kenya National Bureau of Statistics (KNBS) that showed a reduction in cement demand from housing and construction sectors.
This could be as a result of the entry of Nigeria’s Dangote group to the Kenyan market, as well as the difference in pricing of their cement.
Companies in the sector have been warned that continued expansion despite this bleak outlook could lead to idle capacity.
Currently, the estimated plant utilization rate is 61.7%. However, Dyer & Blair Investment Bank predicts that this will fall to 45.4 %in 2018.
Kenya accounts for 53.2 per cent of the 21.1 million tonne installed capacity in East Africa. Savannah Cement also plans to increase its capacity while Indian firm Cemtech Sanghi is expected to build a 1.2 million tonnes plant in West Pokot
