East African Cables has issued a profit warning for the full year after posting a Ksh97 million loss for the six months to June.
Disruptions in its manufacturing processes following a plant upgrade in Nairobi has been compounded by foreign exchange losses, the firm said in a filing made to Nairobi Securities Exchange (NSE) yesterday. “The reason for reduced earnings has been due to significant interruptions in our production output at our Kitui Road factory,” it said.
The firm’s earnings have been on a steady decline since reporting a net profit of Ksh522 million in 2012. Subsequent years’ earnings have been worse, recording a Ksh398 million and Ksh341 million in 2013 and 2014 respectively.
A first-half loss now means that 2015 could be its worst year, with its difficulties amplified by the firm’s struggling Tanzanian subsidiary. Its business is heavily exposed to international prices for copper, used by the firm in the manufacture of conductors. The business is also affected by currency swings since it’s heavily depended on dollars to purchases raw materials.
Ms Virginia Ndunge, East African Cables company secretary, said the drop in revenues was inevitable as there was need to remove old machines and install new equipment at its Nairobi plant to improve capacity and boost efficiency. “The refurbishment is expected to be fully completed in September 2015 and thereafter the capacity of the factory would significantly increase,” explained Ms Ndunge.
In the six months to June, the company’s revenue slumped by 22%, which the firm attributed to reduced output as the plant upgrade was under way. Products manufactured by East African Cables include low voltage Copper electrical cables for domestic and industrial use, Aluminium conductors and cables for power transmission and distribution.