Loans force Uchumi into losses

Wednesday February 25 2015

By Monitor correspondent

Nairobi.

Supermarket chain, Uchumi posted a loss caused by expensive bank loans from KCB and Cooperative Bank of Kenya.
The loss posted for the year ending December 2014 shot up by a tenth, mainly driven by higher finance costs, salaries and rent.

Uchumi borrowed Shs16.2 billion (Ksh600 million) from KCB and Shs10.93 billion (Ksh405 million) from Co-operative Bank - Kenya to pay suppliers before its December rights issue.

The supermarket chain posted a half-year loss of Shs7 billion (Ksh262.3 million) compared to a net profit of Shs2.88b (Ksh106.9m) recorded earlier in the year.

The loss, analysts say resulted from the persistent volatility in the EAC economies worsened by a fall in real sales, which declined from Shs197 billion (Ksh7.3 billion) to Shs183.6 billion (Ksh6.8 billion).

In notes accompanying the retailers’ results, Mr Jonathan Ciano, the group chief executive, said: “The volatile economic environment adversely affected people’s spending power thus impacting our sales.”

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The company was also affected by a delayed rights issues which, according to Mr Ciano, forced the retailer to turn to bank loans in a bid to raise working capital.

The company’s cost of financing more than doubled to Shs1.62b (Ksh60 million) from Shs702 million (Ksh26 million) a year earlier mainly attributed to the bank loans.

Uchumi raised Shs24.1 billion (Ksh895.8 million) through a rights issue last year, an offer that was over-subscribed by 83 per cent.

Mr Ciano said the retailer is banking on the funds raised through the cash call to boost cash flow, pay suppliers in time, and refurbish its existing outlets as well as opening 10 new outlets, five in Kenya, three in Tanzania and two in Uganda.

Uganda outlets
Uchumi operates several outlets in Uganda.
Earlier this year, the retailer announced it would establish two outlets in Uganda.
However, it had earlier closed its outlet at Freedom City on Entebbe Road on the account that it had failed to register required sales.

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