Bamburi Cement Limited has reduced its dividend payout to shareholders by two thirds after it reported Sh3.9 billion drop in its net earnings for the year ended December 2017. Bamburi will now pay shareholders Sh4 dividend per share in contrast to Sh12 per share paid in 2016. LafargeHolcim has a 58.6 percent stake in Bamburi Cement.
Last October, the company paid an interim dividend of Sh2.5 per ordinary share held (Sh907 million) and will pay a final dividend of Sh1.5 per share on July 27 if shareholders approve.
The company also reported Sh1.97 billion net profit after revenues decreased by 6 percent to Sh35.9 billion. The reasons for the poor performance were reduced sales in its Kenyan market and an expensive tax disagreement in Uganda.
“The group’s cash position reflected a decrease to Sh2 billion from the prior year’s Sh6.9 billion primarily due to dividend payments and capacity expansions in both Kenya and Uganda,” Bamburi said in a statement.
The firm blamed the drop in its earnings on the extended election cycle, “tightened liquidity” because of the interest rate capping law, drought, and infrastructure projects that were held up.
The company also said its bottom-line was negatively affected by tax provisions originating from disputed assessments by the Uganda Revenue Authority (URA) which raised its effective corporate tax to 52 percent.
Bamburi’s assets rose from Sh21.8 billion to Sh33.2 billion after a revaluation that increased the value of its properties in Uganda and Kenya by Sh419 million and Sh5.7 billion in that order. The revaluation is conducted every 5 years.
Presently, the company is expanding capacity in Tanzania and Uganda through a multi-billion shilling scheme that will boost its yearly production capacity by 1.8 million tonnes.
In Kenya, the expansion of the company’s Athi River plant will increase its annual capacity to 3.2 million tonnes (50.79 percent).
“The expected commissioning of the new capacity in the second half of 2018 will see the business enhance its market leadership position,” said John Simba, Bamburi’s chairman.
Despite the poor performance in 2017, Bamburi expects to do better this year. However, the company still has to face great risks such as power and coal prices as well as stiff competition from new entrants into the market who are oversupplying it thereby reducing retail prices.