Loss of market share sees Portland issue profit warning

East Africa Portland Cement Company has issued a profit warning, saying its earnings will decline by over a quarter in the full year ending June 2014.

The company's managers cite a raft of challenges that have depressed its business in the period under review. The cement maker has been grappling with low prices for the commodity occasioned by increased competition and loss of market share to rivals.

“The company has faced challenges characterised by increased competition that depressed prices, loss of market share due to new entrants into the local market,” the cement maker said in a statement.

Increased staff costs and high interest rates coupled with depreciation of the Kenya shilling against major world currencies are also to blame for expected poor performance in the year ending June, the management said.

“Unfavourable developments in the company’s export markets in the East African region resulted in drastically reduced sales for the period,” the firm said.

BOARDROOM WRANGLES

In the first half period of the accounting year that ended December 2013, the cement marker’s profit after tax declined by 44 per cent to Sh283 million compared with Sh327 million recorded in a similar period in 2012, and analysts say the profit warning “comes as no surprise.”

“Despite all the uncertainty surrounding East Africa Portland Cement Company’s current and future operations, even without the boardroom wrangles, the firm is still the least efficient operator amongst key industry players,” said Standard Investment Bank analysts.

The government is also planning to offload the cement maker to Nigerian billionaire Aliko Dangote.

Last year, Mr Dangote announced plans to invest Sh35 billion in Kenya’s cement industry. His firm, Dangote Cement, recently acquired a business licence and mining rights in Kenya.

Portland’s operations have been frequently interrupted by boardroom wrangles between management, Lafarge and the government.