Car & General Issues Profit Warning on High Costs

Car & General (C&G), a diversified trading firm, has issued a profit warning for the 15 months ending December, preparing investors for a 25% drop in earnings.

Due to higher costs, the publicly traded company’s profit dropped significantly in the half-year to March.

C&G changed its fiscal year end from September to December, which means it will report results for 15 months until the end of this year before returning to the standard 12 months.

In the fiscal year ending September 2022, the company earned Sh679.4 million in net income. It then reported a net profit of Sh96.6 million in the six months to March, a decrease of 84.6 percent from Sh629.3 million the previous year and setting the stage for the profit warning.

“The board of directors … wishes to inform the shareholders of the company, potential investors, and the general public that based on the assessment of the unaudited consolidated accounts for the period to 30th September 2023, the earnings for the fifteen months ending 31st December 2023 of the group are expected to decrease by more than 25 percent in comparison to the prior year,” C&G said in a notice.

“The drop in the group’s performance is mainly attributed to a combination of factors including, foreign exchange losses on US$ exposures resulting from a significant strengthening of US$; a deterioration of unit economics of motorcycles which hurt motorcycle sales in Kenya; an increase in finance costs; and demurrage costs in Tanzania.”

In recent years, the company has been on an expansion spree, opening a helmet manufacturing plant last year. Real estate, consumer credit, motorcycles, and tuk-tuks (three-wheelers) are among its other businesses.

C&G’s proposed re-acquisition of a 50% stake in diesel engine distributor Cummins C&G Limited, which it had ceded in 2017, was approved by Kenya’s Competition Authority in July.

C&G previously sold its stake in Cummins CG to franchise US owner Cummins Inc. in 2017 for Sh412 million in order to form the joint venture.