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| Monday, 23 August 2010 23:18 |
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East African Cables is betting on aggressive marketing of new products to turn around its fortunes. The firm, which has concentrated on making electricity conductor cables, has expanded its product offering by venturing in importation and distribution of telecommunication and IT networking cables from Korea. The move into data cables is aimed at deflecting competition from cheap copper and aluminium cables imported from China. EA Cables’ share price is showing signs of recovery following the announcement of the new product offering. The firm has added telecommunication, data, LAN, and fibre optic cables to its product list to shore up profits. The company’s share price rose from KSh18 in July to Sh19.35 at Friday’s trade. The firm’s from chief executive George Mwangi said the new products were meant to shove up the company’s profitability and standing at the Nairobi Stock Exchange. “We have signed agreements with a Korean company, LS Cables, which is part of LG Electronics Group. The products are of very high quality and the prices are reasonable. We shall be launching this partnership soon, but we are already getting orders. The products will give us additional business through distribution,” said Mr Mwangi. EA Cables, the only cable maker quoted at the Nairobi Stock Exchange, issued a profit warning in July after forecasting “significant loss” in the Tanzanian operations as a result of poor sales to that country’s utility sector. The company has come under intense competition from other producers of cables such the Nairobi based Kenwestfal Works Limited and importers of cheap products. The cable maker said bad debts forced its Tanzania outfit to record losses. The company, which manufactures aluminium and copper cables for both local and export markets, blamed the drop in profits in 2009 on unstable prices. Diminishing stockpiles EA cables is yet to declare its half year results, but full year results for 2009 dipped to Sh526 million from the Sh670 million recorded in 2008. Trade at the London Metal Exchange on Friday saw copper gain for the fourth consecutive day, erasing earlier losses as diminishing stockpiles improved the outlook for demand. Three-month copper sales on the London Metal Exchange gained as much as 0.9 per cent to $7,458.25 a tonne on Friday, the highest price since August 9, Bloomberg reported. Growing global demand, especially in China, has seen copper prices fluctuate between $3,748 a tonne in March and $6,195 a tonne in July — a 40 per cent rise. The price fluctuation has hit local manufacturers of electricity cables, with some of them unable to fully pass the higher costs on to their customers for fear of losing business. Erode margins “The high prices of course erode margins as it’s getting increasingly difficult to pass all the costs to the customer,” said Mr Mwangi. It is also counting on its expanding reach across the recently launched East Africa Community Common Markets to grow market share. The company currently operates in the five East Africa countries of Kenya, Uganda, Tanzania, Rwanda, and Burundi where telecommunication penetration is gaining ground. EA Cables’ entry into the data marketing business follows concern over depressed sales to the Kenya Power and Lighting Company (KPLC) and Tanzania Electric Supply Company Limited (Tenesco) — its main consumers of electricity cables. The two, the main buyers of electricity conductors across the east African region, have resorted to importing from low priced suppliers. Add this page to your favorite Social Bookmarking websites           |
