Crown Paints Kenya net profits dip to Ksh37m

Listed paints manufacturer Crown Paints Kenya has reported a significant decrease of 87 percent in its half-year earnings for 2023. In a conversation with Dr. Rakesh Rao, Group Chief Executive Officer of Crown Paints Kenya, he attributed the challenging trading results to a 20 percent decline in product demand across the industry. The tough economic conditions were further exacerbated by significant exchange rate losses due to local currency depreciation, making it difficult for the company to pass on price increases to customers. Despite a 10 percent drop in performance compared to the previous year, Dr. Rao highlighted that the overall market experienced a larger decline of 20 percent, indicating that Crown Paints Kenya fared relatively better in comparison to its competitors. Looking ahead, Dr. Rao expressed hope for improved business prospects, particularly in the low-cost and affordable housing sector, driven by ambitious government projects under the President William Ruto administration. Discussing the operational expenses, Dr. Rao emphasized that the firm has effectively managed its costs, with operational expansions and inflation being the primary cost drivers. By maintaining strict control over expenses, Crown Paints Kenya has displayed consistent positive cash flow and successfully reduced liabilities by nearly 1 billion compared to the previous year. This prudent financial management coupled with efficient cost control measures has contributed to the company's resilience in challenging market conditions. In terms of market outlook, Dr. Rao highlighted the positive performance of subsidiaries in Uganda, Tanzania, and Rwanda, noting consistent profitability in Uganda and steady operations in Tanzania and Rwanda. The East African market, including Kenya, typically experiences increased demand from July to December, presenting an opportunity for growth and recovery in the coming months. Strategizing aggressive marketing initiatives and focusing on gaining market share from competitors are key priorities for Crown Paints Kenya to mitigate the losses incurred in the first half of the year. Dr. Rao expressed optimism about regaining lost ground and meeting budgetary targets by leveraging market energy and implementing targeted strategies. However, concerns loom over the impact of rising interest rates on the manufacturing sector in Kenya. Dr. Rao highlighted the declining contribution of manufacturing to the Kenyan economy, dropping from 13-14 percent to 6-7 percent in recent years. The increase in interest rates announced by the Central Bank of Kenya is expected to further strain the private sector activities, affecting margins and cash flows of businesses in the manufacturing industry. As the sector grapples with these challenges, Dr. Rao emphasized the importance of adopting smart cost-control measures and strategic planning to navigate the difficult economic landscape and ensure survival in the face of mounting pressures.