East African Portland Cement Company (EAPCC) has reported a 71.3 per cent drop in profit.
The performance was attributed to a dilapidated cement production plant, which has since been upgraded, increased competition and a drop in the valuation of its properties.
The company has said its, profit after tax, had fallen to Sh541.59 million in the year to June 2022 from Sh1.89 billion in 2021.
The reduced earnings were on account of the revaluation of its investment property to Sh2.47 billion this year from Sh5.78 billion in the same period in 2021.
Last year, the company sought shareholder approval to sell some of its idle land, which it said could result in "significant changes to investment property value in the subsequent year (2022)."
The company on October 26 disclosed that it had transferred some of its land in Athi River to KCB Group, enabling it to settle a long-standing debt.
EAPCC's revenue fell 22 per cent to Sh2.14 billion from Sh2.76 billion in 2021.
This, it said, was due to a plant that kept breaking down, resulting in reduced cement production as well as increased competition in the sector.
A cost-cutting exercise resulted in the reduction of administration costs by half to Sh1.13 billion from Sh2.47 billion in 2021.
The company also said it had fully settled one of its long-standing debts to KCB Bank as well as some of its historical cases that also helped cut administration costs.
Finance costs fell by Sh100.9 million during the period under review from Sh835.7 million last year.
"Administration and selling expenses decreased by 54 per cent (Sh1.3 billion), resulting from reduction in loss from disposal of land (KCB debt settlement) and reduced litigation cost, amongst others, underscoring the impact of cost containment measures embarked on in the year under review," said the company.
"The cost containment initiatives, reduction in finance cost (Sh735 million) following the settlement of the KCB loan and other gains from replacement of kiln shell will position the business for a period of take-off as it embarks on implementation of its five-year strategic plan leveraged on its brand equity and rich history."
The firm also said it had repaired the plant that was breaking down and now expects to increase its production of cement as well as the presence of its products in the market.
It is also eyeing the supply of cement to infrastructure projects.
"The kiln shell challenges accounted for 80 per cent of the downtime for the year, and the group expects improved capacity utilisation to shore up turnover to profitability levels," said EAPCC.
The company, which emerged from loss-making in 2021, is still in the red with a negative working capital, where current liabilities at Sh14.3 billion exceed its current assets at Sh2 billion.