Increased activity in the property market is reshaping the fortunes of construction professionals and manufacturers of building materials as they record double digits growth in income on increased demand.
Makers of cement, corrugated sheets and steel products and paints reckon they are facing their best sales in three years—a pointer that optimism over the recovery of Kenya’s economy is translating into increased sales and cash flow on rising interest on home ownership.
Consultants such as architects, structural engineers and artisans like plumbers and fitters are earning more from increased volumes of work with developers reporting a scarcity of artisans.
Firms such as East African Portland Cement Company (EAPCC), iron sheet maker Mabati Rollings, paint firm Crown Berger and metal dealer Devki Steels have recorded brisk business in the last six months—translating into increased earnings power, room for fresh hiring and higher dividends.
“The uptake of galvanised sheets for both domestic and industrial construction has increased more than 22 per cent this year due to a booming construction sector,” said Gupta Abhijeet, a sales executive at Devki Steel Mills, adding that the firm recorded single digit growth in 2009 and 2008.
Players in the cement business also echoed similar comments: “The rising demand for cement has moved us to the profit territory in the quarter ended September,” said Mark ole Karbolo, the chairman of EAPCC.
The cement firm posted a loss of Sh292 million in the year ended June 2010 on rising production costs that ate into additional sales made in the year.
Mr Karbolo said that sales growth was running ahead of costs in the three months to September, propelling the company to profitability, a trend that is resonating at Athi River Mining and Bamburi Cement.
“The prospects for the second half of the year look promising and we expect to achieve stronger growth in 2010 compared to prior years,” said an official at Bamburi Cement.
Latest figures from the Kenya National Bureau of Statistics (KNBS) indicate cement consumption rose 15 per cent to 1.5 million metric tonnes in the first half of 2010 compared to a similar period last year.
Production of galvanised sheets has leapt 20 per cent to 105,214 metric tonnes in the six months to June compared to a similar period a year earlier, showed the KNBS data.
Construction along with agriculture and manufacturing sectors emerged as the biggest drivers of the economy in the first half of the year.
The sector recorded a 18 per cent growth in the second quarter ended June—making it the biggest growth among the set sectors.
Analysts attribute the increased activity in the sectors mostly to the reduced home loans and increased demand for property has egged developers to step developments, especially in the mid segment of the market that is dishing better returns.
In the past six months, most banks lowered their base lending rates, speeding up credit expansion in an economy and offering momentum to property consumer demand
Kenya’s economy has also benefited from a huge jump in the uptake of loans in the construction sector where the Central Bank of Kenya (CBK) says net lending grew from Sh43.3 billion to Sh81.7 billion in the year to June faster than household lending that rose from Sh84.3 billion to Sh118 billion.
Property prices rose by 2.6 per cent and rents jumped four per cent in the three months to October 1 after stagnating in the first half of the year, according to the quarterly HassConsult Index.
These pricing movements also helped property regain its position as an asset class of premium returns that were higher comparative investment channels such as the stock market, government bonds and cash in the bank.
Property developers have been busy building projects for the middle class, especially along Mombasa Road, Thika Road and Kiambu egged on by the higher returns relative to the building apartments for the middle class.
This increased activity is what is leading paint makers to also record double digit growth in sales, especially from new homes.
“We have registered a 15 per cent growth in sales from June to October this year,” said Rakesh Rao, the CEO of Crown Berger.
The paint firms saw revenues grow 16 per cent to Sh1.4 billion in the six months to June, leading to a Sh42.5 million net profit.
No comments:
Post a Comment