Bamburi Cement Group has defied COVID 19 adverse impact on the economy to post an improved pre-tax profit.
According to a statement from the firm the cement, the manufacturer has recorded a pre-tax profit of KSh 213 million ($1.96 million) for the first half ending June 30, 2020, up from KSh 23 million ($$212,431) in the corresponding period last year.
The growth in Profit before Tax has been attributed to the swift implementation of the “Health, Cost and Cash” action plan adopted by the Group at the onset of the Covid-19 Pandemic, to help mitigate the adverse impact of the crisis.
“The performance of the Group in the first half of 2020 is a testament that all of us; our employees, our customers, our stakeholders, and our communities, we can overcome adversity if we espouse the spirit of caring for one another.” Said Dr. John Simba – Chairman of the firm.
Thanks to the pandemic topline declined by 13 per cent to KSh 16.2 billion ($149.6 million) compared to KSh 18.7 billion ($172.7 million) in 2019. Despite the Ksh 2.4bn ($22.1 million) drop in the top line, Operating Profit only suffered a drop of Ksh 104 million ($960,557). Taking into account the high fixed cost and asset base of Bamburi, it is evident that the deliberate cost containment actions undertaken have clearly paid off in cushioning the bottom line from the adverse impact of the pandemic.
The Cash preservation part of the “Health, Cost and Cash” campaign also yielded significant benefits that led to a drop in Financing related charges. Finance costs were down by 24 per cent. As part of the cash drive, Bamburi’s Current Assets (mainly inventories and receivables) reduced significantly from the end 2019 position, releasing Ksh 1.4 billion ($12.9 million) of positive cash flow. This contributed to the lowering of third party overdraft facilities in Hima. In addition, the Group’s decision to optimize internal cash resources, saw the cash-rich Kenya parent extend an intragroup loan to the Uganda subsidiary. The combined effect of the reduction in working capital and the intragroup loan led to the reduction of short term borrowings from Ksh 1.7 billion ($15.7 million) as at end of 2019 to Ksh 92 million ($849,724) as at end of June.
The Group was able to record a foreign currency gain, wherein prior year it had recorded a loss, thanks to the strengthening of the Uganda shilling against major currencies,. The long term borrowings, associated with Uganda based Hima subsidiary is denominated in US$.
In March 2020 the Government of Kenya announced a raft of tax measures intended to provide relief from the adverse impact of COVID 19 pandemic to businesses, employees, and other taxpayers at large. Part of these measures included the reduction of the corporation tax rate from 30% to 25%. Owing to the significant fixed asset base synonymous with cement companies, Bamburi has realized a net tax credit on its Profit and Loss account arising from the restatement of its deferred a tax liability at the new corporation tax rate.
Of Significance is the cash flow that Bamburi has generated during the difficult COVID 19 period. In the first half of 2020, Bamburi Group has defied all odds, including reduced topline to register significant growth in cash flow of Ksh1.8 billion ($16.6 million).
Commenting on the Group’s half-year results, The Group Managing Director Seddiq Hassani noted that despite depressed demand that has led to a decline in topline, the improved bottom-line performance demonstrates Bamburi’s resilience in the face of adversity.
“We are pleased to have delivered positive results in the first half of 2020 and we will continue to drive cost optimization while working to improve services and deliver high-quality products to our customers.” He added.
Commenting on the business outlook, the Group Chairman Dr. John Simba, indicated that the adverse impact of the COVID 19 pandemic is expected to carry on into the second half of 2020. He noted that the Group’s priority continues to be the implementation of necessary measures to protect employees’ health and safety, as well as that of the communities and partners that The Bamburi Group works with.
“The performance of the Group in the first half of 2020 is a testament that all of us; our employees, our customers, our stakeholders, and our communities, we can overcome adversity if we espouse the spirit of caring for one another. We are in this together, we can and will win together. We hail the measures taken by the Governments of Kenya and Uganda in supporting individuals and businesses weather the impact of this common enemy” Dr. Simba said.