East African Cables slides deeper into loss

Tanzania subsidiary continued to experience working capital constraints.

In Summary

•Loss for the period ended June increased to Sh214.4 million, amid high debt obligations.

•This is from Sh185.9 million reported in the same period last year, a 15.2 per cent fall, as investors continued to miss on dividends.

East African Cables products./
East African Cables products./

East African Cables has sunk deeper into the red as half-year losses for the period ended June increased to Sh214.4 million, amid high debt obligations.

This is from Sh185.9 million reported in the same period last year, a 15.2 per cent fall, as investors continue to miss on dividends.

The losses came on the back of increased operating expenses, which wiped out gains made in gross profits that went up 24 per cent to Sh312 million.

The growth is attributed to increased sales volumes in the retail sector, sustained market development and communication efforts as well as increased operating efficiencies.

During the period under review, the Tanzania subsidiary continued to experience working capital constraints, management said, significantly affecting its bottom line and negatively impacting the Group’s consolidated performance.

 “East African Cables Plc’s Kenya business has maintained a growth trajectory, sustained by growing demand from retail and wholesale categories for building and construction projects,” it said in its financial statement.

The group faces an insolvency threat from Equity Bank, a matter which the company has challenged in court.

At the end of June, current liabilities outstripped current assets, which stood at Sh3.4 billion against an asset value of Sh891.7 million.

Equity Bank in June this year placed the parent company TransCentury and E.A cables under receivership over a disputed Sh4.8 billion loan, months after it missed a Sh2 billion cash call.

Muniu Thoithi and George Weru of consultancy firm-Price Waterhouse Coopers (PwC) were appointed joint receivers.

However, a commercial court temporarily suspended a decision by Equity Bank to place the affairs of the investment firm under receive managers.

The Judge issued the order after the firm told the court that the appointment of receiver managers would cripple their operations particularly ongoing massive projects including the ones being carried out by its subsidiaries.

Some of the projects valued at over Sh4 billion are in Kenya, Tanzania, Uganda, DRC and Zambia.

Most are at an advanced stage, and others have been finalised just pending inspection and approval, the parent company said.

The completion of these projects, according to the firm, will raise additional funds towards the liquidation of outstanding debt.

The projects vary from the supply and installation of weighbridges, renewal of expired licences, among others.

The firm told the court that it has been liquidating the outstanding debt and has made all the efforts to agree on a workable program with Equity, in light of  “the hard economic situations in the country.”

In an interview with the Star last month, managing director and CEO Paul Muigai said the firm has intensified innovation and produced electrical accessories, including switches and circuits alongside cables.

He said the firm's financial health is looking up.

Muigai said they remain focused on growing a strong order pipeline and improving contribution from the export market.

"Our business is on the right path to recovery, and I am confident that as we implement our refreshed strategy, the business will become profitable and give a return to shareholders in the medium term,'' he said. 

The firm produces utility cables which include aluminium overhead conductors for aerial transmission lines and service drop cables for secondary overhead transmission.

It also manufactures feeders for residential homes, cables for power and lighting circuits, home electrical appliances and armoured and armorer cables for electricity distribution.

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