NAIROBI, Kenya, Jan 21 – Olympia Capital Holdings Limited (OCHL) said on Thursday that it expected a return to profitability in the next year following the adoption of a new business model in the Southern African market.
Addressing journalists in Nairobi, Olympia Managing Director Michael Matu said the prospect follows a renewed business plan for the market that saw it restructure its Yokota SA (South Africa) and Natwood Africa (Botswana) businesses.
With this in mind, Mr Matu said OCHL anticipates making Sh40 million in after tax profit.
“I think from our projections we will achieve just short of Sh1 billion in turnover and we should be able to comfortably achieve about Sh40 million profit after tax in the 2010/2011 financial year,” he said.
The projections come after a period the company had considered exiting the South African market owing to poor performance resulting in a Sh61.4 million loss in 2009.
In 2006, OCHL acquired a 74 percent stake in Plush Products, which manufactured curtain tracking and related products sold under the Yokota brand, but the business became unsustainable as the company was not able to meet bottom-line demands.
Sixty percent of sales went to large retailers, with a clause that allowed slowing moving stock to be returned in exchange for credit, which affected the company’s performance.
Mr Matu also admitted to weak price negotiating power that hampered growth.
Under the new business model, OCHL purchased the Yokuta brand name in December 2009 as well as to downsize on staff and having products produced by third parties in an effort of cutting overhead costs.
“In our first year, we expect to make Sh100 million top line with profit before tax of Sh10 million,” Mr Matu said.
The situation was similar at Natwood Africa (manufacturers of wooden lifestyle products) but Mr Matu expects the first year to rake in a profit of Sh15 million.
Mr Matu revealed once investments in southern Africa had matured, the company would venture into new operations in Kenya.
“The first priority is to stabilise the new business we have in Southern Africa and use the cash flow generated to venture into Kenya.”
Real estate is one such venture where the company has already invested close to Sh200 million. OCHL plans to set up a Sh50 million fund for what it terms as “speculative investments.”
“It will be speculative where we are looking to a one to two year investment period and exit having made capital gains,” Mr Matu highlighted.
Without divulging details, Mr Matu said OCHL intends to venture into the food processing business by acquiring an already established food company in the 2011 financial year.
“The population is growing and we would like to get the wallet share of people in the market. We just felt it is a natural line we could go into and there are some possibilities and that is why we decided to go that way.”