CMC Holdings issues profit warning

By Jackson Okoth

Motor vehicle dealer, CMC Holdings, has issued a profit warning to the Nairobi Stock Exchange (NSE) and Capital Markets Authority (CMA) that its earnings this year would be lower than expected.

In a letter signed by the group Chief Executive Martin Forster, the firm attributes its reduced profitability to global recession, increases in financing costs, drought and depreciation of the local currency against the Japanese yen.

The profit warning by CMC Holdings comes when the car market in East Africa is experiencing reduced volumes. This trend is expected to continue until the first-quarter of 2010.

Necessary measures

"It should be noted that the management is taking all the necessary measures to ensure that we can compete and secure our share of the motor vehicle market," said Forster.

Figures indicate that the new car market has shrunk weighed down by slow economy. For instance, between January and October, the industry sold 8,608 units compared to 11,068 units sold over a corresponding period last year.

A harsh business environment has engulfed the local auto industry with the dark cloud still hovering over the global auto business as indicated by the plummeting vehicle sales and tightening credit conditions.

Difficult times

This situation is billed as one of the most difficult times for the automotive Industry.

CMC Group’s half-year results, for the six months ending March 31, showed that the number of vehicles and tractors sold were 1,532 units against a target of 1,863.