BOC issues profit warning as sluggish demand hurts its business

By John Oyuke

Industrial gases maker, BOC Kenya Ltd, is anticipating a dip in its earnings for the year ending December 31.

It warned shareholders that earnings are projected to be lower than the earnings reported last year.

"This is in line with restructuring and other measures announced and implemented following this year’s half-year results," the firm said in a notice to the Nairobi Stock Exchange. The firm, which produces industrial gases, medical gases, scientific gases, refrigerants, welding equipment and consumables, and safety equipment, posted a 21 per cent decline in pre tax profit from Sh295.1 million to Sh231.6 million for the year ended December 31, last year, which it attributed to expensive raw materials, and high cost of power.

Sales flat

The company’s sales remained almost flat due to poor local demand for its products as a result of little activity in agriculture and manufacturing sectors last year.

In the six months ending June 30, its profit after tax declined from Sh102.9 million over the same period last year, to Sh70.1 million, amid sluggish sales, and high cost of production. Profit before tax fell 32 per cent from Sh146.9 million last year, to Sh100.5 million for the first half of this year.

The regional gas Company attributed the decline in the half-year results to the increased cost of operation, a one-off separation costs, and reduced income from investments.

The firm recently underwent a change of guard following the resignation of Managing Director John Kariuki earlier in the year. He was replaced by South African Maria Msiska.

Analysts say BOC’s performance is an indication that its core business of selling medical and industrial gases other than carbon dioxide is approaching maturity.

BOC has been eyeing entry into the carbon dioxide market through the purchase of Carbacid Investment, but the deal engineered in 2005 failed to take off after the capital markets regulator refused to grant approval.