Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: East African Portland Cement Issue Profit Warning

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Kenya: Press Releases: East African Portland Cement Issue Profit Warning

Monday, 18 May 2009

15 May 2009 --- East African Portland Cement Co. Ltd wishes to announce in line with the requirements of the Capital Markets Authority Act cap 485(A) and the Nairobi Stock Exchange regulations that the projected earnings level for the year ended 30 June 2009 may be lower than 25% of that achieved in the year ended 30 June 2008.

While cement production levels and revenues achieved in the current year exceed lasts year’s by 3% and 10% respectively, the impact of fuel and electricity eroded incomes by substantial margins. The global rise in fuel prices experienced in the latter part of 2008 meant that the average cost of furnace oil this financial year is KES50,696 per metric tonne compared to KES34,344 in the previous year, an increase of 48%. Similarly, power tariffs went up by 82% from KES6.58 per kwh to KES11.99 per kwh this year.

The combined impact of these increases cost the company an additional KES426m by 31 March 2009.

Further the company was faced with the effect of a strong Japanese Yen. Between July 2008 and March 2009, the yen appreciated 34% from 0.6108 to 0.8213, thereby resulting in an unrealised exchange loss of KES896m. This amount arises from the Yen denominated loan of approximately JPY4.0bn outstanding at 31 March 2009. Repayments of this loan are scheduled and the company sees no difficulty in maintaining these.

It is however instructive to note the international currency movements are usually unpredictable and therefore the exchange rate of the Yen at 30 June 2009 may well be quite different than that at 31 March 2009. Should the rate substantially improve, then the company’s results will also reflect this

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