High power costs hurt BOC Kenya profits

By James Anyanzwa

The high cost and erratic supply of electricity helped erode earnings at industrial and medical gas company, BOC Kenya Limited. Other factors included the rising cost of inputs and falling demand.

The company on Monday announced a 20 per cent decline in its half-year profit for the period ending June 30, 2009.

The drop to Sh146 million, from Sh183 million over a similar period last year, showed that Kenya’s industrial complex continues to feel the effects of a slowing economy and high energy costs.

Mr John Kariuki, the company’s managing director, attributed the performance to a harsh trading environment that lowered demand for the company products.

Escalating input costs — especially power and raw materials, global economic crisis, high food prices and the postponement or slowdown of key capital projects, affected the company’s growth during the period

"As members of the Board of Directors, we envisage a continuing challenging business environment," Kariuki told an investor briefing in Nairobi on Friday.

He said the gas manufacturer would invest Sh80 million in its main air separation plant, in order to enhance the company’s capacity and efficiency.

Cost reduction

"We are keen as a company, to implement cost reduction measures to stem the erosion on the overall turnover," said Kariuki.

Kariuki said the cost and quality of power was of particularl concern to BOC Kenya and other key players in the manufacturing sector.

He said the ongoing power-rationing programme would slow down recovery efforts in many firms, and may even reverse the minimal recovery gains that have been realized in recent times.

The board of directors recommended an interim dividend of Sh2 for every share held, amounting to a total payout bill of over Sh39 million.