Research analysts at Faida Investment Bank have given a hold recommendation for Bamburi Cement Stock arguing that the company ‘has a strong market presence in the East African region.’
Bamburi Cement is a leading cement manufacturer in Kenya. It has operations in Uganda and Rwanda. In 2018, the company aimed to increase its cement production capacity by 1.8 million metric tonnes. In line with its production goals, Bamburi Cement recently completed the construction of a grinding plant in Athi River which is expected to produce additional 900,000 metric tonnes of cement.
The cement production sector is facing increasing competition from international firms such as Nigeria’s Dangote Cement. In order to counter the competition, Bamburi needs to employ cost-cutting measures that will enable it to sell its products at a low rate. The firm has already adopted some changes aimed at reducing production costs such as the use of cheaper fuel alternatives like biomass.
Bamburi Cement had a tough year in 2017. The company registered 66 per cent drop in net profit largely due to macroeconomic challenges in the countries it operates in. It has issued a profit warning for the financial year 2018. The cement company attributes the expected decline in net profits to;
- Difficult market environment in Kenya and Uganda,
- High energy costs and
- Provisions for receivables in the Ugandan subsidiary
