Cement manufacturers face a difficult year following the effects of the Corona Virus that has underpinned their ability to meet huge financial costs resulting from recent investments.
Bamburi Cement which,which commissioned an additional 0.9 million Tonne grinding capacity per year to bring its total Capacity to 3.2 million Tonnes says its finance costs hit Sh438 million last year up from 258 Million last year up from 258 Million in 2018.
This was on account of the Ksh 2 Billion long term debt acquired by its Uganda Unit Hima Cement Limited(HCL) to Finance.
Bamburi Chairman John Simba said the company had hoped for a windfall from the removal of the interest rate cap, a stable economy and “Big Four” Agenda projects.
However all investments have been redirected to the fight against Covid 19,forcing the company to review its outlook.
“With Government expenditure refocused towards the war on Covid 19,we will need to reassess the market and the general economic situation,”.Also affected has been Devki Steel which has been on an expansion spree in recent months by acquiring Athi River Mining and Cemtech to attain an annual production capacity of up to 2 million Tonnes.This year it set up a Ksh 6 Billion plant in Salgaa,Nakuru county raising its production capacity to 3.5 Million tonnes.
“We have seen a huge drop in demand of up to 30 pc because those who have finished projects do not want to start new ones.Profits are down and it’s challenging.
“But there is nothing we can do because it’s a global challenge” Devki Group founder Narendra Raval.
To add unto the big finance costs,the companies are facing a decline in the construction sector,which saw consumption decline 1.3 per cent last year.