BOC's Sh900m Expansion Poised to Shore Up Profit

BOC Kenya has posted a Sh265 million net profit and eyes better results that are supported by an ambitious Sh900 million expansion strategy.

The profit, which represents earnings for the past 15 months was realised despite escalation of input costs, especially in the first quarter.

BOC Kenya's managing director, Mr John Kariuki told an investor briefing on Friday the expansion plan would strengthen the company's footprint in Ugandan and Tanzania where key sectors such as mining are experiencing a boom period.

The regional outlook will also provide the company with a diversified source of income although the two markets have been contributing just 15 per cent of the group's total revenue over the years.

The company also plans to deepen its local operations apart from the planned regional investments.

"We will increase our capital expenditure to enhance our capacity and provide us with the ability to meet the market demands over the next 15 years," Kariuki told investors.

Despite an escalation of input costs, the company was able to maintain its operating costs at manageable levels. He singled out the increase cost of steel, power outages, high distribution costs and a shortage of key products, especially liquified petroleum gas and argon gas as some of the challenges.

At the same time, Kairuki said that the company had been affected by the freeze on its planned merger with Carbacid Kenya.

"We are still waiting for a ruling by the Capital Markets Authority (CMA). The delay has affected our business plan and stopped us from entering the carbon dioxide market," Kariuki said. He also acknowledged that the decision by CMA to appeal against a tribunal ruling that okayed the takeover had a negative effect on the ability of BOC's shareholders to trade.

Failed to meet standards

The takeover of Carbacid by BOC Kenya has been on the cards for more than a year after the market regulator declined to endorse the deal, arguing that BOC Gases had not met all the terms it had stated in an offer to Carbacid shareholders.

BOC Kenya referred the matter to the Capital Markets Tribunal, which ruled in its favour on March 16 and directed the regulator to approve the listing of the enlarged BOC Kenya Group.

CMA has, however, appealed against the decision in the High Court, arguing that the action would impair the regulatory capacity of the authority.

During the year under review, the company changed its financial year-end from September 30 to December 31, after it was acquired by the Linde Group of Germany.

Kariuki said profit before tax increased by 17 per cent to Sh399 million, up form Sh333 million recorded in the previous period.