Carbacid Investments recorded a 10.3 percent drop in net profit to Sh434.9 million in the half year ended January as a stronger shilling eroded the value of its sales in the regional markets.
The carbon dioxide manufacturer, whose product is used by producers of alcohol and soft drinks, had posted a net income of Sh485.1 million a year earlier.
The company’s sales declined 12.9 percent to Sh940.6 million from Sh1.08 billion, underlining the impact of the weaker US dollar in which it is paid for its exports compared to the Kenya shilling which is its reporting currency.
“Trading turnover for the 6 months declined by 13 percent largely attributed to the stronger shilling versus the US$, given that a major part of the business is in export markets,” the company said in a statement.
“There was also softer demand for carbon dioxide in various markets in this period.”
About 75 percent of the company’s sales are derived from external markets including Uganda, Zambia, Rwanda and Malawi. A stronger shilling therefore reduces the value of the export sales when they are translated to the local currency.
The shilling traded at Sh129.2 against the dollar on January 31 this year, marking an appreciation of 24.7 percent from the same day in 2024 when it traded at Sh161.3 according to market prices.
The Nairobi Securities Exchange-listed firm noted that some countries are suffering from dollar shortages, hurting demand for its products.
Carbacid’s gross profit margin weakened to 41 percent from 45 percent due to higher costs.
The company said its administration costs increased seven percent, driven by inflation and increased marketing spend to secure existing and additional business.
Carbacid has invested in solar power generation, a move that has reduced its plant costs. The company said it borrowed more to finance its plant expansion in a move that, coupled with higher interest rates, served to raise its finance costs.
Its asset finance facilities increased to Sh655.4 million from Sh428.6 million.
The company recorded a larger gain of Sh39.4 million from its investments in listed equities in Kenya and Tanzania compared to Sh11.3 million a year earlier.
Income from fixed income assets including government bonds and fixed deposit accounts increased to Sh137.9 million from Sh132.6 million, benefitting from higher interest rates.
The company booked the higher income despite its portfolio of these securities shrinking to Sh1.8 billion from Sh1.97 billion.
Carbacid is the latest manufacturer to report weaker sales and earnings on account of the stronger shilling.
Cigarette manufacturer BAT Kenya posted a 19.4 percent decline in net profit to Sh4.4 billion in the year ended December 2024 when it suffered from higher operating costs and lower income from exports.
Finance costs, capturing the impact of the shilling’s dramatic gain early last year on the company’s export sales, stood at Sh829 million. This reversed a finance income of Sh97 million a year earlier.
