38 LOCAL THE STAR Monday, October 27, 2014

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BY CONSTANT MUNDA

EAST African Portland Cement has reported a massive Sh386.6 million net loss for the year ended June 30, a steep slide from a Sh1.78 billion net pro! t in the previous ! nancial year.

The NSE-listed cement maker, which is majority owned by the State, blames poor show on a “dif! -cult trading environment character-ised by price competition, high staff costs and a weakening shilling”.

EAPCC said stellar performance in 2012/13 included Sh730 million in fair value gain on its property in-vestments and an additional Sh594 million in foreign exchange gains, hence the stark dip in 2013/14.

Sales declined slightly in the pe-riod to Sh9.06 billion from Sh9.21 billion a year earlier on reported price undercutting in the increas-ingly competitive market. This was despite a two per cent growth in sales and production volumes.

“Turnover decreased by two per cent over prior year due to price re-ductions,” the ! rm said in a state-ment late Friday.

Pricing of cement has been under

focus, with the competition watch-dog – the Competition Authority of Kenya –opening an inquiry into in" uence of Lafarge Group on the market in May.

The French conglomerate owns a 58.9 per cent stake in Bamburi ce-ment, the largest player in Kenya by market share, and 42 per cent in EAPCC.

The state controls a majority 52 per cent stake in EAPCC – 25 per cent directly through the National Treasury and 27 per cent indirectly through the National Social Secu-rity Fund.

Industrialisation Principal Secre-tary Wilson Songa argued last Feb-ruary that Larfarge’s cross-share-holding in Bamburi and EAPCC bordered on “monopolistic” in" u-ences in the cement industry. The case is pending before the High court.

Bamburi reported a 28.1 per cent drop in net pro! t for the half-year period to June 2014 to Sh1.6 billion, but sales revenue was up by 8.9 per cent to Sh17.2 billion, nearly double EAPCC’s full year’s Sh9.06 billion.

Although EAPCC’s cost of sales contracted by a slim 3.3 per cent

to Sh6.88 billion on “successful cost management and increasing ef-! ciency”, administrative expenses edged higher by 33.5 per cent to Sh2.79 billion eating into pro! t.

It blamed the spike on Sh400 mil-lion spent on management and staff restructuring following a job evalu-ation, and Sh200 million paid to dis-puted contracts that went through arbitration in the focus year.

The cement maker however fore-casts that its fortunes will rebound from this year on heavy infrastruc-tural spending by the government and large scale real estate develop-ments by the private sector.

“...the industry has attracted large investments by new and ex-isting players hoping to cash in on the boom. The company has not been left behind and is aggressive-ly investing in new machinery and equipment to improve ef! ciency and capacity,” EAPCC said.

EAPCC hopes to increase annual production capacity by 400,000 tonnes from this year, leveraging on a new pre-cast plant, packaging line, cement mill feeding system, among other new capital investments, at a cost Sh2.5 billion.

BY CONSTANT MUNDA

World Bank Group president Jim Yong Kim and United Nations secretary-general Ban Ki-Moon will visit Kenya tomorrow and are slated to hold talks with President Uhuru Kenyatta on strengthening cooperation for peace, security and development in the Horn of Africa.

Kim, accompanied by United

Nations secretary-general Ban Ki-moon, will also meet representa-tives from the private sector on his day-long visit to Nairobi.

The discussions with business leaders will focus on “regional integration and economic opportunities for countries in the Horn”, the bank said in a statement on Friday.

World Bank’s portfolio to Kenya

stand at $4.7 billion (Sh419.71 billion) comprising of $3.8 billion (Sh373.65 billion) for 24 na-tional projects and $900 million (Sh80.40 billion) for seven regional projects.

It has committed $484.2 million (Sh43.25 billion) for this ! nancial year to next June, rising to an estimated $565 million (Sh50.47 billion) next year, it said.

World Bank, UN bosses in Kenya tomorrow

Cement fi rm sinks into huge net loss

Can YOU outsmart the expert?

ALY KHAN’S STAR

PORTFOLIO

THERE has been plenty of Action in Africa and its markets of late. The collapse in oil prices – Brent crude, the international benchmark, fell from $115.71 a barrel on June 19 to $82.60 a barrel on October 16, the lowest price in almost four years

– is weighing big time on African oil producers such as Nigeria, where the Naira has been wobbling, and Angola.

Last week, we learnt that Trinidad and Tobago is substituting crude from Gabon with Colombian and Russian shipments amid protests by refi nery workers alarmed by the outbreak of Ebola in other African countries. This was not something I had factored in. If African oil economies already pounded by lower prices cannot sell in a timely manner, or even at all, the consequential knock-on effects will be dramatic.

Let’s stay with the commodity market for a moment and note that Ebola has Cote D’Ivoire surrounded on all sides and cocoa prices [Ivory Coast is the top producer], whilst 15 per cent up year-to-date, could seriously spike off the charts if the country suffers a serious Ebola infection.

Paul Bulcke, CEO of Nestle, saw fi t to mention the situation twice last week. Nestle SA said it is on “high alert” because the company has operations in Africa including Ivory Coast, Ghana, Guinea, Nigeria, Cameroon and Senegal. On October 16, Bulcke said Nestlé’s cocoa supply comes out of that region.

African Currency markets have seen a great deal of action. The Ghanaian cedi has been a big outlier to the downside against the dollar. The cedi has fallen 35.32 per cent this year, hitting a low of 3.89 to the dollar on August 28 and last traded at 3.18-3.28.

The rand has of course been soft and is always at the bleeding edge when markets are roiled. It’s a Pavlovian reaction the world over. The world looks uncertain, selling the rand.

What is interesting is the performance of the Egyptian pound – it’s rock steady – and our very own ‘Tefl on’ shilling, which has retreated about four per cent year-to-date. I do not have to tell you how currency performance can juice or shred returns.

The Dar es Salaam All-Share index, which is 43 per cent up since the start of the year, is the stand-out Africa equity index in 2014. It is worth mentioning that there is trend change in matters Tanzanian capital markets and investors would do well to pay attention.

Egypt is in second place and has returned 29.7 per cent year-to-date, but the EGX 30 has retreated 1,014 points since September 30. Nairobi sits third, having served up a 17.7 per cent return and is just 2.8 per cent below a record high reached on September 23.

South Africa, whilst still 3.5 per cent up in 2014, has corrected 4,363 points since July 29 when it closed at a record. Nigeria has been struggling as investors consider next year’s election and oil prices. African equities have struggled in October.

Last week but one, the African Eurobond complex took a big buffeting, with prices seeing the most dramatic fall in a single session for a number of years. Prices have recovered since then. Our fi ve-year Eurobond trades at fi ve per cent and our 10-year at six per cent.

The sharp fall in oil prices will see super petrol prices below Sh100 per litre before year-end. This will prove a powerful catalyst for improved consumer sentiment and improved spending. The resilience of the shilling and the Nairobi Securities Exchange All-Share index is informed by that view.

Shares go up and down and readers are advised that this column represents Mr Satchu’s personal opinions.

BLEAK OUTLOOK: EAPCC managing director Kepha Tande during a past investor briefi ng.

outsmart

ALY KHAN’S

PORTFOLIO

AFRICA ECONOMIES REACT DIFFERENTLY TO SHOCKS

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