East Africa’s leading paint maker Crown Paints announced an increase in Group Turnover by 13.7 per cent compared to last year. The firm reported an 11.5 per cent decline in after-tax profitability for the half-year ended June 30, compared to a similar period in 2008.
While releasing the results, the firm’s Finance Director Mr. Patrick Mwati attributed high costs of fuel, weakening of the Kenyan shilling against the dollar and high cost of raw materials as to reasons why the company recorded low profits.
Crown Paints Vice-chairman Hussein Ramji said the drop was mainly attributed to capital investment in the company which he said attracted higher taxation that affected the company™s profitability.
“I don’t see it as a drop in profits. Last year we did 90 per cent of our profits in six months and 10 in the second half, we are definitely going to see a change this year”, he said.
During a similar period in 2008 profits stood at Sh46.9 million while this year they were at Sh41.5 million. Cash flow turned positive to Sh20 million from negative Sh101 million during the first half of 2009.
At the same time, the paint maker saw turnover increase by 13.7 per cent compared to last year. The vice-chairman believes with increased sales in the first half, profits could increase by 15 per cent.
“Our sales have increased by 14 per cent in the first six months and we expect it to carry through to year-end. As our sales increase we should be up 10 to 15 per cent above,” said Mr. Ramji.
While the company is not affected by the current power rationing, the cost still remains high which Mr. Ramji said made them pass on the cost to the consumer.
He however says it is a temporary phase and with the projected El Nino set to start in September, it is expected that power generation will be back and lead to a decrease in energy costs.
“I see it lasting another six months and with the rains set to start soon hopefully that will see a reduction in the fuel surcharge cost which would mean a reduction in manufacturing costs,” he said.
Going forward the company will look to explore growth opportunities in the regional markets especially Ethiopia. It already has a distribution network in South Sudan.
The Board of Directors did not recommend paying dividends until the end of year results are released to know how to reflect it on the earnings per share.