Eveready opts for Egypt imports as high costs bite

Eveready products. The firm is diversifying into real estate. PHOTO | FILE | NATION MEDIA GROUP 

By VICTOR JUMA

In Summary

• Closure of the factory will see the company retrench 99 employees –half of its workforce— effective Wednesday.
• The firm will incur Sh110 million in layoff costs.

Eveready East Africa has announced a divestiture into real estate after shutting down its Nakuru battery production factory, which has for decades been a premium employer in the Rift Valley town.

Managing director Jackson Mutua yesterday announced the shock decision to shut down the factory, adding that Eveready will now only be involved in distribution of ready-made goods. It will now source all its products, including batteries, from its affiliate Energizer Egypt.

“We are shifting our focus from manufacturing to distribution which is now our core business,” said Mr Mutua at a press briefing, spelling an end to the manufacturer’s existence.

Eveready is owned 10.51 per cent by US-based Energizer International, which also owns Energizer Egypt. High operating costs, mainly comprising on transportation and energy bills, have seen several Kenyan lose out to Egypt, which falls within the Common Market for east and Southern Africa (Comesa) trade area.

Mr Mutua added that the move to import the products from Egypt—which has lower production costs tied to cheap electricity— will eliminate expenses of running the Nakuru plant besides boosting the firm’s competitiveness in terms of pricing.

Though Egypt recently raised its electricity tariffs, the country’s energy costs are less than half Kenya’s average of Sh17.5 per kilowatt hour (kWh).

Closure of the factory will see the company retrench 99 employees –half of its workforce— effective Wednesday. The firm will incur Sh110 million in layoff costs.

READ: Eveready closes struggling Nakuru battery factory

Mr Mutua said the company will invite joint venture partners to develop commercial or residential properties on the 20 acres of land that houses the factory. Eveready says the houses will be for letting, not for sale.

“They could either be equity partners or financiers (lenders),” he said, adding that the firm has incorporated Flamingo Properties Kenya as a vehicle for the property ventures.

Eveready becomes the latest company to venture into real estate that is seen providing high and stable returns. Property developers have earned double-digit returns, riding on increased demand for both residential and commercial units from the middle class and businesses.

This has seen more investors led by insurers and pension firms build more commercial property such as malls, warehouses, industrial parks, and offices to benefit from high rental fees and capital gains.

vjuma@ke.nationmediacom