Cost cutting pays dividends for Bamburi Cement
Bamburi Cement more than tripled its net profit in the year ended December 2020, recording the biggest earnings jump among Nairobi Securities Exchange listed firms. The company’s Group Managing Director, Seddiq Hassani joins CNBC Africa for more.
Mon, 26 Apr 2021 10:16:07 GMT
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AI Generated Summary
- Bamburi Cement's proactive cost-cutting strategy and cash management initiatives propelled a substantial increase in net profits for the year ending December 2020, outperforming other Nairobi Securities Exchange listed firms.
- The company's focus on optimizing operational costs, enhancing production efficiency, and improving logistics operations contributed to a significant boost in financial performance without compromising service quality.
- Amidst uncertainties in the construction industry, Bamburi Cement remains optimistic about the sector's recovery, citing encouraging trends in construction projects and a positive outlook for sustained growth in 2021.
Bamburi Cement, a leading cement manufacturer, has seen a remarkable upsurge in its net profits for the year ending December 2020, marking a significant leap in earnings among Nairobi Securities Exchange listed companies. The company's Group Managing Director, Seddiq Hassani, credited this success to a strategic focus on cost-cutting measures and cash management amidst the uncertainties brought about by the Covid-19 pandemic. In an exclusive interview with CNBC Africa, Hassani shed light on the company's financial performance and the strategic decisions that fueled its impressive growth. 2020 proved to be a pivotal year for Bamburi Cement as it navigated through the challenges posed by the global health crisis. Since March last year, the company implemented a robust strategy centered on safeguarding the health of its employees and partners while also fortifying its financial resilience. Hassani emphasized the importance of concentrating on controllable factors like cash flow and costs, given the volatile market conditions influenced by lockdowns and pandemic-related restrictions. By meticulously reviewing expenses, Bamburi Cement managed to enhance its operational efficiency across industrial processes, logistics, and procurement without resorting to workforce reductions. The company also focused on optimizing inventory levels and streamlining cash collections from customers, contributing to its exceptional financial performance. Hassani underscored that the substantial increase in profits was primarily driven by prudent cost-management practices rather than revenue growth. When questioned about the areas where cost-cutting measures were most effective, Hassani highlighted improvements in clinker production efficiency and enhanced cement delivery logistics. By reducing energy consumption, refining equipment maintenance practices, and optimizing transport routes, Bamburi Cement significantly slashed operational costs. The company's decision to consolidate its production sites and depots further optimized expenses without compromising capacity or customer service quality. By strategically aligning cost-saving initiatives with operational enhancements, Bamburi Cement achieved significant financial gains while maintaining operational effectiveness. Despite the broader challenges faced by the construction industry due to lockdowns and disruptions, Hassani expressed optimism about the sector's recovery. He noted a gradual rebound in construction activities from mid-2020, with several major infrastructure projects contributing to the industry's resurgence. Notable projects like the Expressway and Donggu-kun du Bypass in Nairobi and Mombasa signaled a positive trend for the construction sector's recovery. Hassani anticipated that the industry's momentum observed in late 2020 would carry over to 2021, backed by promising performance in the first quarter. While cautious of potential external factors impacting the sector's trajectory, Hassani remained hopeful for sustained growth in the construction industry. Addressing concerns about Bamburi Cement's stock performance on the Nairobi Securities Exchange, Hassani acknowledged market dynamics but expressed confidence in the company's resilience and strong financial results. Despite fluctuations in share prices, he remained optimistic about investor confidence in Bamburi Cement's long-term prospects. Regarding the decision to issue dividends to shareholders, Hassani emphasized the company's robust cash flow and commitment to rewarding investor trust. He reassured stakeholders of Bamburi Cement's confidence in sustaining operational cash generation in the future. The discussion then shifted to Hima Cement, a subsidiary that previously faced operational challenges, mainly due to border closures impacting its market reach. Despite setbacks in 2019, Hima Cement focused on diversifying its market presence, particularly in Uganda and exploring opportunities in the regional East African Community (EAC). By strategically pivoting away from reliance on specific markets like Rwanda, Hima Cement positioned itself to capitalize on emerging sectors like oil and gas in Uganda. Hassani expressed optimism about Hima Cement's prospects in securing significant projects in the mining and oil sectors, signaling a strategic shift towards sustainable growth and market expansion.