Hima cement sell tax hole sinks Bamburi into Ksh399 million loss

By News Agency , Agency
Published at 07:00 AM Apr 20 2024
A worker gazing at the Hima cement plant
Photo: File
A worker gazing at the Hima cement plant

TAX liabilities related to the sale of Bamburi Cement's Hima Cement Limited in Uganda weighed down profits made for the year ended December 31, 2023, necessitating a 120 percent loss.

The end-of-year results released by the cement maker in Nairobi show it incurred a net loss of Ksh399m compared to Ksh181m profit earned in the previous financial year. 

This weighed down a 160 percent profit after tax earned by the Kenyan unit for the year. 

Bamburi sold its entire 70 percent stake in the Ugandan subsidiary, Hima Cement for an estimated Ksh12.3bn, a deal that was closed last month.

The penalties arose from a tax assessment from 2007 to 2011.

The firm has been battling a Ksh1.2bn tax pressure in Kenya and Uganda.

Early this month, the Nairobi Securities-listed cement maker issued a profit warning, an indication that net earnings for the year will drop beyond 25 percent. 

 The period's turnover rose by 6.3 percent to Sh22bn from Sh20bn over the previous year – attributable to improved commercial strategy execution, increasing export sales volumes, and differential pricing for the company’s diverse range of products and solutions.

Despite tough operating conditions, the group reported solid cash generation from operations, which increased to Sh2.89bn as a result of improved operating profit and working capital.

According to Bamburi Cement CEO, Mohit Kapoor, the year under review was impacted by cost pressures from new and higher taxation measures, rising inflation, and fast depreciating local currency, which disproportionately raised fuel, power and production costs.

He attributed the results to a strong focus on cost-cutting strategies, execution of commercial strategies and strengthening industrial and operational efficiencies.

“We effected stringent cost-cutting strategies on operations, and energy sources by using alternative fuels, and by lowering raw materials importation dependency,'' Kapoor said. 

"Our agility and speed in decision-making in the context of changing market dynamics helped us to execute strategic actions to deliver solid performance."

The firm attributed industrial performance improvement across all Industrial Performance Benchmarks (IPB) contributed to the delivery of solid financial performance.

 Kapoor said the company is targeting better results in this financial year.

“Our divestiture from the Ugandan market allows Bamburi Cement PLC to focus on the Kenyan market where we are positioned for record EBIT margins driven by our shift from volume to value."

The board has recommended the payment of a first and final dividend of Ksh5.47 per ordinary share amounting to Ksh1.98bn for the year ended 31 December 2023 as compared to Ksh0.75 per ordinary share amounting to Ksh272m in 2022.

Bamburi Cement Group chairman, John Simba said the firm's strategic direction focused on the Kenyan business and is now well positioned to achieve profitable growth across all our businesses, fuelled by sustainability, innovation and operational excellence.