Bamburi cuts dividend after Sh4bn profit dip

East Africa’s largest cement maker Bamburi has slashed its dividend payout to shareholders by two thirds after its net earnings dropped by a massive Sh3.9 billion in the year ended December 2017.

Bamburi, which is 58.6 per cent owned by French multinational LafargeHolcim, posted a Sh1.97 billion net profit after revenues dropped by six per cent to Sh35.9 billion.

The cement maker is now set to pay its shareholders Sh4 dividend for every share held, a huge drop from the Sh12 per share it paid out in 2016.

Bamburi last October paid an interim dividend of Sh2.5 for every ordinary share held (Sh907 million) and will, subject to shareholder approval, pay a final dividend of Sh1.5 per share on July 27.

“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 cement maker attributed the drop in earnings to the prolonged election cycle, tightened liquidity due to the interest rate capping law, drought and delayed infrastructure projects.

Bamburi said its bottom-line was also negatively impacted by “tax provisions” arising from disputed assessments by the taxman that raised its effective corporate tax to 52 per cent.

The firm did not disclose the exact nature of the tax dispute or the amount in question, but said the assessment by the Uganda Revenue Authority (URA) was made in March 2018.

Bamburi’s assets increased from Sh21.8 billion to Sh33.2 billion following a revaluation that increased the value of its property in Kenya and Uganda by Sh5.7 billion and Sh419 million respectively. The reassessment is done every five years.

The cement maker is currently expanding capacity in Uganda and Tanzania, in a multi-billion shilling project it says will increase its annual production capacity by 1.8 million tonnes.

In Kenya, expansion of the Athi River plant is expected to increase the listed company’s annual capacity – including that of its Mombasa plants — to 3.2 million tonnes or 50.79 per cent of Kenya’s annual cement consumption.

“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.

Bamburi said it expects a rebound in its performance this year despite the significant dip in profitability, and the contraction in sales last year.

Bamburi has more recently faced stiff competition from new players, who have been oversupplying the market and pulling down retail prices.

He took over from Eric Kironde, who has been at the helm in an acting capacity since October 2017. Mr Hassani joined Bamburi from LafargeHolcim’s global operations where he served as head of Growth and Innovation for Middle East and Africa.

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