Nairobi — East African Cables has announced a 96 per cent increase in pretax profit for the first quarter of 2006. Profit before tax was Sh96.5 million compared to Sh49 million reported the previous period.

The rise in profits was attributed to the boom experienced in the construction industry last year, which saw turnover rise by a hefty 115 per cent. It grew to over Sh448 million from Sh208 million reported the previous period. The company has experienced sustained growth over the year with pretax profit for 2005 growing by an impressive 65 per cent, which lifted its revenues to the Sh1 billion mark for the first time.

Managing director Mugo Kibati said despite the continued increase in international metal prices, East African Cables had managed to lower the cost of production by restricting its focus on target markets and adopting stricter controls on operating costs.

"East African Cables Group continues to solidify its presence in the market as well as entrench our vision of being the premier one-stop shop for electrical cabling solutions in the region by providing time and tested quality products in accordance to the ISO 9001:2000 principles of continuous improvement," said Mr Kibati.

The growth is commendable as the company managed to operate under rising world prices in its main raw materials - aluminium and copper - and unfair competition from sub-standards goods in the Kenyan market and cheap imports from the Middle East. This forced the company to run a six-month campaign to sensitise industry players on products that pose danger to the construction industry.

Dubbed "Spark your life", the campaign is targeting electric engineers and developers and emphasises safe wiring. The acquisition of their Tanzanian subsidiary, East Africa Cables (Tanzania) Ltd, also played a big role in swelling the company's earnings. East African Cables could not have gone wrong in buying 51 per cent of Tanzanian Daesung Cable Ltd (TDCL), the largest cable and conductor manufacturer in that country, as it contributed a handsome 15 per cent of total growth in just three months.

Without the contribution from the Tanzania subsidiary, the growth turnover was 85 per cent. East African Cables acquired the Tanzanian firm in a Sh160 million deal, which saw the latter change its name to East Africa Cables (Tanzania). The payment of the company, formerly owned by Nexans Korea, was done through debt financing. East African Cables is looking to grow its earnings and markets share through East African Cables (Tanzania).

The subsidiary has enabled the firm to penetrate the Southern Africa Development because Tanzania is a member of the bloc. This means that the firm is able to export goods from the Tanzanian plant to SADC members duty-free. It also enjoys duty-free exports to the wider Common Market for Eastern and Southern Africa (Comesa) to which Kenya is a member. Tanzania quit the trading bloc two years ago in favour of SADC, even though Kenya andUganda are pressing to return to the Comesa fold.

On the other hand, the firm is set to benefit from the establishment of East Africa Customs Union, which enables it to export goods duty-free within the three East African countries. This puts the firm at the forefront in exploiting the vibrant construction industries in Kenya, Uganda and Rwanda, where it has an independent agency in Kigali.

The company's success can be partly attributed to its recent technical and commercial partnership with world-class cable maker, Nexan of France. The alliance has fortified the company's strength and capacity as it moves towards gaining international standards.

"We set out to grow this company to a regional player away from the domestic focus we initially had and we are well on our way to doing that," said chairman Zeph Mbugua. "

Our multifaceted strategy encompassing a proactive marketing stance, a sustained public education campaign, a focus on quality, which includes more efficient production processes and improved production planning, as well as cost control, is finally bearing fruit. the group will continue focusing on initiatives to achieve growth, increase efficiency and customer confidence," said Mr Kibati.