By John Njiraini
Cement manufacturer, East Africa Portland Cement (EAPC). is gearing for a significant drop in earnings after it issued a profit warning for the year ending June 30.
Signalling what could be yet another tough year, the company said projected earning for this year could plunge by 25 per cent compared to last year.
"Earnings for the year ended June 30, 2009 may be lower than 25 per cent of that achieved in the year ended June 30, 2008," indicated a statement signed by Kephar Tande, General Manager Finance.
The statement was addressed to the Capital Markets Authority and the Nairobi Stock Exchange.
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According to the profit warning, Sh426 million has been wiped out from the company’s earnings by the high costs of fuel and electricity.
The surge in the cost of crude oil in the international market last year resulted in the average cost of furnace oil increasing from Sh34,000 per metric tonne to Sh50,000.
Electricity tariffs also rose by 82 per cent, up from Sh6 kWh to Sh12 kWh.
EAPC was also hit by the effects of a strong Japanese Yen, which appreciated by 34 per cent between July last year and March, costing the company Sh896 million in unrealized exchange loss.
Despite the bleak projections, however, cement production levels and revenues achieved this year, the company reckons, has exceeded last year’s levels by three per cent and 10 per cent respectively.
The unimpressive results would mark the second year in running in which EAPC is recording a decline in profits.