25th February 2003

Rising Tide Lifts Bamburi Cement’s Boat
By Tom Mogusu

TRESARRIEU: “Our market share in the region has improved.”

BAMBURI Cement beat market expectations after its earnings grew by 68 percent to Sh3.38 per share.
Managing director Didier Tresarrieu said improved demand for cement and a fall in financing costs boosted their revenues and cashflows.
Financing costs dropped by 68 percent as the business generated healthy cashflow enabling repayment of debt in Kenya and Uganda.

In 2001, Bamburi’s financing costs were Sh217 million compared to Sh 69 million in 2002. Revenues grew by 13 percent to hit Sh10 billion in the same year. In a market starved of good returns, Bamburi shareholders will receive a final dividend of Sh181 million. This brings the dividend paid out in the last financial year to Sh408 million 2001.

“Sales revenues for the Group were driven largely by demand growth in Kenya and Uganda, as well as better revenue realization in both countries,” said Tresarrieu. “Our market share in the region has improved, reflecting our commercial leadership, sales and distribution focus.”

He said operating profits were boosted by higher revenues as the benefits of Bamburi’s restructuring and investments started flowing through. Over the last one year, the firm’s shares on the Nairobi Stock Exchange have risen by 246 percent, from a low of Sh15 to a high of Sh52. the shares are currently trading at Sh 45.
The company’s chairman, Richard Kemoli, said the local cement consumption grew by 8 percent.

“This is a stock that is driven purely by fundamentals due to its track record,” David Kinyua, an analysts with Stanbic Investment Services (EA), said. Kinyua expected the stock to continue performing better as Bamburi’s earnings continue to be buoyed by the growth in the economy. The firm has been one of the direct victims of costly power bills in the country, and market analysts say the review of energy agreements between Kenya Power and Lightning Company (KPLC) and the Independent Power Producers (IPPs) will drastically lower this bill.

The firm is also expected to start reaping from its large chain of acquisitions in Kenya and Uganda. Locally, Bamburi has a 20 percent stake in Athi River Mining, which it acquired in 1998 for Sh 180 million. It also acquired a significant stake in Uganda’s Hima Cement Limited in 1999.

The Hima plant has a capacity of 240,000 tonnes and has significantly improved Bamburi’s market presence in Uganda. It is this plant that is expected to provide the group with a leverage in the Great Lakes region.