CMC to Grow Half-Year Earnings 90 Percent

Car dealer CMC Holdings shrugged off the effects of the post- election violence to post a 90 per cent increase in half year earnings as it announced it was headed for a record year.

The motor and equipment supplier issued an alert in January on its earnings, arguing the negative impact of the violence on the tourism, agricultural and transport sector could hurt its business since it relies on the twin sectors for growth.

At the time, automobile dealers said the violence and the subsequent uncertainty had resulted in thinning out of the order books.

Yesterday, however, CMC Holdings said its net profit for the six months ended March 2008 had increased from Sh287 million to Sh547 million.

The motor dealer attributed the profit jump to increased sales of vehicles and tractors, which surpassed its target for the period, on the buoyant performance of the transport sector.The firm said its revenues climbed 32 per cent to Sh6.3 billion from Sh4.8billion.

"Our profit before tax of Sh782.8 million is 26.8 per cent above the budgeted profit...in these circumstances we remain confident that the company is heading for a record trading year," said Martin Forster, the group chief executive of the motor firm in a statement.

Buoyed by the performance, Mr Forster noted that the firm was headed to be the number player in the new motor vehicle market by unit sales.

"Our market share in Kenya during the period under review averaged almost 22 per cent compared to just below 18 per cent in the same period last year," he added.

Kenya Motor Industry (KMI) statistics show that CMC Motors' share of the market has been rising steadily over the past three years from 14.8 per cent in 2005 to 19.6 per cent last year - bringing it within touching distance to Toyota East Africa.

Toyota is the market leader with a 22 per cent of the new motor market, but the Japanese automaker has over the past three years been losing market share to CMC and General Motors (GM).

This out turn of sales for CMC and GM is being attributed to the change in the market structure that has come with increased pace of economic growth.

As the economy entered the recovery mode, demand for new motor vehicles has been most robust in the commercial segment of the market, which includes trucks, buses and tractors.

CMC and GM are heavily represented on the commercial segment, which has resulted in a change of fortunes for the twin automakers but Toyota - with a brand line that mainly comprises of saloon cars - has been losing market share.

The increased demand for trucks and buses is attributed to the robust growth of sectors such as transport, agriculture and construction, which have upped their demand for commercial and heavy duty vehicles.

The saloon car market has in the past three years come under serious attack from the imported second hand vehicles increasing the pressure that Toyota has been feeling since the market was liberalised in 1992.

Toyota's rivals, especially CMC Motors with a wide range of commercial brands in their stable, have gained an easy advantage in the marketplace.