Stockout pushes Eveready into Sh58.9 million half-year loss

Regional consumer goods company, Eveready East Africa, has sunk deeper into losses posting Sh58.9 million loss for the six month period ended March 31, 2016.

Eveready East Africa Managing Director Jackson Mutua.

The loss translates into a 373.6 per cent drop in its half-year earnings compared to Sh12.4 million loss posted in a similar period last year. This reverses the full year improvement that had seen the company cut its loss by 56 per cent from Sh178 million to Sh78 million loss.

According to Eveready Group Managing Director Jackson Mutua, the firm’s diversification programme has been yielding positive results but problems in stock supply weighed down the performance.

“The group recorded a drop in revenue as a result of changes within our main global supplier of Carbon Zinc and Alkaline batteries which adversely affected the supply of product for a considerable period of time,” said Mutua.

Therefore, the group’s results show that cost of sales, which is usually tied to the amount of stock sold, dropped by 46 per cent to Sh244.7 million. In a similar half-year period last year, the cost of stock sold was Sh453.3 million.

As a result, its revenue also dipped by more than half (50.2 per cent) from Sh602.8 million to Sh300 million.

In the commentary accompanying the results, Mutua noted that the stock-out situation saw the company record a Sh90 million loss before tax compared to Sh18 million in prior period. The loss means that its shareholders will once again walk away empty handed after directors failed to recommend any dividend.

New products

During the period under review, the group managed to cut its operating expenses by 13.6 per cent to Sh116.4 million. However, its borrowing hit Sh376 million, which is 977 per cent rise from just Sh34.9 million in the previous half-year period.

Its assets base has also shrunk from Sh1.5 billion to Sh1.26 billion. The board, however, remains upbeat that diversification strategy will propel the firm back into profitability.

“The out of stock situation has been addressed and recovery is expected going forward. Diversification into new products remains important to our strategic efforts towards achieving sustainable growth in revenues,” said Mutua.