Bamburi Cement net profit nearly doubles in first half

A boom in construction and foreign exchange gains has helped Bamburi Cement’s net profit almost double for the six months to June. The cement manufacturer reported an 86 per cent leap in net profits to Sh3 billion, with the management projecting an even better second half.

The company, which is controlled by France’s Lafarge, attributed the strong performance to growth in demand in its two main markets, Uganda and Kenya, cost cutting and gains in its dollar-based liquid assets due to a steep weakening of the Ugandan and Kenyan currencies.

“We are optimistic that the business environment will remain stable in the second half of the year,” said Managing Director Bruno Pescheux. The depreciation of the shilling enabled the firm to book more than Sh357 million in gains for the six-month period that was earned from dollar denominated liquid assets, which the firm did not disclose.

However, the firm carried over Sh11.4 billion in cash and cash equivalents on its books as at June 30, representing about a third of total assets. But the cement maker is one of the firms with huge cash reserves among the listed firms, and could have benefited from holding the funds in dollars.

Kenya’s currency has depreciated by over 10 per cent against the dollar, which would be a significant gain for firms that have been holding their assets in the US units.

Mr Pescheux said the sustained activity in the construction sector including the mega infrastructure projects like the Standard Gauge Railway, had boost demand for cement. Bamburi has supplied more than half of the cement needs of the SGR so far, according to official statistics.

The group turnover increased to Sh19.3 billion from Sh17.3 billion as a result of improved market conditions in both Kenya and Uganda following strong growth in the infrastructure and contractor segments, stable macro-economic indicators in both countries and strong Inland Africa export markets, the firm said.

The MD projects that the higher cement demand in the region where the firm has operations in would be sustained into the second half.

“The outlook for the rest of 2015 is positive, with projected and continued growth in all East African economies, underpinned by a robust construction industry.

Macro-economic indicators are projected to be largely stable but with some caution on the changing environment, especially in the energy sector. The profit growth reported by Bamburi is the largest among the firms listed at the Nairobi Securities Exchange, where most have reported losses or dips in profitability.