Price wars cost Portland Cement Sh386 million

William Lay, the Chairman of East Africa Portland Cement Company. FILE PHOTO | NATION MEDIA GROUP 

In Summary

• The firm, which made headlines between 2011 and 2013 over its boardroom wrangles, was also hit hard by an increase in administrative costs by Sh700 million. 
• Turnover declined by 2 per cent to Sh9 billion from Sh9.2 billion in the period under review due to cement price cuts.

By NATION CORRESPONDENT
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Price wars and a tough operating environment earned East African Portland Cement a Sh386 million loss in the financial year ended June 2014, reversing a Sh1.7 billion profit after tax it made in a similar period last year.

The firm, which made headlines between 2011 and 2013 over its boardroom wrangles, was also hit hard by an increase in administrative costs by Sh700 million. 

“Performance this year was adversely impacted by the difficult trading environment that was characterised by price competition, high staff costs and a weakening shilling,” the management said in a statement accompanying results.

Turnover declined by two per cent to Sh9 billion from Sh9.2 billion in the period under review due to cement price cuts.

The rise in administrative expenses resulted from restructuring of management and increase in staff costs.

The manufacturer also paid penalties amounting to Sh200 million in an arbitration over undisclosed disputed contracts. The manufacturer is planning to spend Sh2.5 billion in new investments aimed at boosting its production capacity.  

Despite increased heavy investment in infrastructure by the government and large-scale real estate developments, the cement maker expects the market to continue being highly competitive, leading to further price declines “for the foreseeable future”.  

The cement maker will not pay a dividend in the financial period.