Bamburi
Cement, East Africa’s largest cement producing company, is a subsidiary of Lafarge
Group.
Financial
Performance
Bamburi
announced audited group earnings results for the year ended December 31, 2011.
The company’s turnover increased by 28% to KES 35.884 billion compared to KES
28.075 billion for the same period in 2010. Operating profit was KES 7.954
billion compared to KES 7.282 billion for the same period in 2010, representing
a growth of 9%. Profit before tax grew by 0.902 billion from KES 7.564 billion
to KES 8.466 billion representing a growth of 12%. Profit for the period was
KES 5.859 billion or KES 14.44 per basic and diluted share compared to KES
5.299 billion or KES 14.02 per basic and diluted share for the same period in
2010. Net cash generated from operating activities was KES 5.680 billion
compared to KES 8.735 billion for the same period in 2010.
Operating
Environment
In
2011 there was a sharp increase in global fuel prices, depreciation of the
Kenyan currency and increased competition from other manufacturers. Both
existing players and new entrants increased capacity. There was a reduction in
sales which was attributed to cheap imports from china, India, Egypt and
Thailand. In spite of this, the Group posted strong financial results mainly
due to significant contribution from its new production facility in Uganda
which was commissioned last year and cost reduction measures adopted across the
Group. The group was also able to get better export prices due to the
appreciation of the US dollar in the second half of 2011.
Investment
Analysis
EPS
grew 3% to 14.44 and with dividend payout ratio at 69%; dividend increased 18%
to KES 10.00, bringing the dividend yield to 6.7%. When you do a comparison
with the industry the average dividend yield for the industry is 1.49%. Its
closest peers Athi River mining (ARM) and East African Portland cement (EAPC)
have a dividend yield of 1.08% and 0.83% respectively; this puts Bamburi way
ahead of its peers in terms of dividend payouts. ARM has an EPS of 11.61 while
that for EAPC is 6.24. The liquidity of Bamburi is also high with average daily
volumes of 33,900 while its closest peer, ARM has 21,600. Bamburi has a P/E
ratio of 9.88 while for ARM is 15.95 and EAPC is 12.68.This clearly shows that
Bamburi is the cheapest.
Recommendation
BUY
The
growth of the regional economies is anticipated to slow down due to rising
global fuel prices and inflation. However, the regional cement market is
expected to remain vibrant. Revenue growth would be driven by demand and
improved efficiencies from Uganda. Exports to neighboring countries are
expected to play an important role, allowing the company to expand its market
leadership position across the East African region.
Quote:
"You
are neither right nor wrong because the crowd disagrees with you. You are right
because your data and reasoning are right." Benjamin Graham.
