Both Bamburi and E.A. Portland Cement company shares fell yesterday signaling possible shifts in investor confidence towards the cement making industry. Bamburi fell by 3.7% to close at KES 158 down from KES 164 on Friday while E.A. Portland fell 4.7% to close at KES 60 down from KES 63 on Friday.
The East African Portland Cement share had been suspended from trading at the NSE in January but resumed trading in April to hit a high of KES 64 mid last month. E.A. Portland also issued a profit warning in March that its year-end earnings would be down at least 25% with increased costs and competition.
Since the Central Bank increased its base lending rate to 18% in December last year, the local construction sector has been one of the worst affected due to the high cost of borrowing for construction projects.
Both Bamburi and E.A. Portland heavily rely on the domestic building and construction sector. For instance, 79% of Bamburi’s revenues last year came from the local building and construction sector. The company had total revenues of Ksh 20.5 billion of which 16.2 billion were from domestic sales.
Sources at a Nairobi based construction management company revealed that building projects had reduced sharply this year, as developers remain averse to the high cost of borrowing while banks are hesitant to lend to developers due to high default risks.
While this may be the case affecting smaller local developers, Bamburi and E.A. Portland may still earn substantially from larger infrastructural development construction projects which have picked up pace as the Government fully embarks on the Vision 2030 initiative.
We will continue to observe the performance of these shares in the coming days.