Jevans Nyabiage
9 December 2009
Nairobi — CMC Holdings is expected to report a dip in profitability for the year ended September 30, 2009, compared to the previous period, a warning issued by the firm on Wednesday indicates.
The car dealer attributes this to the global economic recession, increase in financing costs, prolonged drought and the depreciation of the Kenyan shilling, and the Japanese Yen, contributing to a reduction in trade volumes and profitability.
In the first half of the 2009 financial year, CMC returned a net profit fall of 19.3 per cent to register Sh631 million in the six months to March compared to Sh892 million it posted in a similar period a year earlier.
The Kenyan subsidiary, which generates a significant portion of the group's revenues, saw its share of profits drop 86 per cent or Sh383 million from 95 per cent last year.
"The half-yearly trading results, published on May 8, 2009, had referred to the economic downturn and its effects on our performance. However, the full impact of these factors on our results was not evident," a statement sent to the Daily Nation and signed by CMC's chief executive, Martin Forster said.
Insiders point to a scramble for a thinning client base among dealers, as the industry took a beating from the effects of the recession.
Shrinking motor vehicle sales is not limited to the Kenyan market: The world over, car makers are threatened with bankruptcy as the global economic meltdown continues to squeeze demand.
The government, which has been a major consumer, is also balking at buying new cars as Treasury trims its expenditure of non-essential items.
The firm was contracted to supply the government with 130 Passats at a cost of Sh499.5 million.
Mr Forster says that the motor industry in the region is dealing in reduced volumes this year and the trend is expected to continue at least until the first quarter of 2010.