NAIROBI, Kenya, Jul 19- East African Cables has warned that it might not post profit for the year ended December 31, 2010 following the poor performance of its Tanzanian subsidiary.
The cable manufacturer said although the Kenyan outfit has remained financially sound and profitable, its manufacturing facility in Dar-es-salaam had not, a situation that will impact its overall performance this year.
“A decline in profitability has occurred within our subsidiary in East African Cables Tanzania arising from significant provisioning of bad and doubtful debts and inventory following a review of receivables and inventory ledgers,” Company Secretary Virginia Ndunge said in a letter to the Capital Markets Authority (CMA).
Sales volatility in the Tanzanian utility sector was also cited as one of the reasons the unit might register losses which will be reflected in the soon to be released results for the first half of the year.
The issuance of a profit warning is in line with the CMA regulations that require a listed company to make such an announcement in cases where there is “a material discrepancy between the projected earnings for the current financial year and the level of earnings in the previous year.”
East African Cables however said it has taken corrective measures to address the situation by restructuring its top management in the East African Cables Tanzania who would be expected to turnaround the outlet.
“The board has undertaken a turnaround strategy aimed at returning the subsidiary to profitability which includes restructuring it to reduce its cost base and mitigating strategies to reduce concentration risk of sales,” the statement further read.
The board expressed confidence that these strategies would bear fruit for the company that is the sole distributor for Nexans in East and Central Africa which ranges from medium and high-voltage cables, telecommunication cables, data cables, local area network systems, fiber optic cables and related accessories.