Jevans Nyabiage
12 January 2010
Nairobi — Car dealer, CMC Holdings has reported a 39 per cent decline in pre-tax profit for the year ended September 30, 2009.
The company, which is famed for the "sweetheart Passat deal" with the Kenya Government, saw its profit drop from Sh1.3 billion recorded on September 30, 2008 to Sh807 million last year.
Coming a few weeks after the company issued a profit warning to its shareholders last month, an audited preliminary financial statement for the year under review shows that vehicle sales went up by 2.1 per cent from Sh11.5 billion in 2008 to Sh11.7 billion.
In the profit warning, the car dealer attributed this to the slowdown in the Kenyan economy that saw its business and that of other motor vehicle dealers hurt revenues and margins. There was also the increase in financing costs, prolonged drought and the depreciation of the Kenyan shilling especially to the Japanese Yen, contributing to a reduction in trade volumes and profitability.
Major sectors, which support sales of motor vehicles, were hard hit this year especially agriculture and tourism. During the year, its earnings per share dropped to Sh0.93 from Sh1.59 in 2008, but the directors are proposing a dividend payment of Sh0.35 per share, down from Sh0.45 per share.
Data from the Kenya Motor Institute Association shows that sales as of October 2009 decreased by 22 per cent with 8,608 units having been sold during this period compared to the same period last year.
Of all its products, the Volkswagen is the only brand that reported increased sales from 137 to 273 units. This can be attributed to the government's decision to opt for the Passats in a bid to cut down State expenditure on fuel guzzlers for executive civil servants.
The Passat accounted for 10 per cent of CMC's total vehicle sales. The firm was contracted to supply the government with 130 vehicles at a cost of Sh499.5 million.
CMC Motors Group Ltd, which is a subsidiary of CMC Holdings, is the largest company within the group and a player in the East African motor industry with exclusive distribution rights for Land Rover, Ford, Mazda, Volkswagen, Suzuki, Maruti, Nissan Diesel range of trucks (medium and heavy commercial) and buses, Iveco, Bobcat, New Holland and Case tractors.