Competition cuts Carbacid carbon dioxide sales 38pc
12 months ago, 2 Jan 13:03
Carbacid Investments #ticker:CARB is facing increased competition in its carbon dioxide business, a trend that has seen sales from that division drop 38.4 per cent from their peak. The Nairobi Securities Exchange-listed firm says it has lost market share to regional alcohol manufacturers who harness carbon dioxide as a byproduct of their production process. Carbacid, which also runs an investment division, says its sales of the gas stood at Sh589.3 million in the year ended July 2017. That represents a decline of 29.1 per cent from the previous year and a 38.4 per cent fall from peak turnover of Sh956.8 million in 2013. The steady decline in the carbon dioxide business has seen the company rely more on its investment arm that holds treasuries, listed equities and real estate, injecting more volatility into its earnings in line with gyrations in its equities and bond holdings. “Our markets have remained challenging during the financial year ended July 31 2017, which was impacted by new competition from alcohol-based manufacturers of carbon dioxide as well as prolonged drought,” Carbacid said in its latest annual report. While pre-tax earnings from carbon dioxide have been on a steady decline, those from the investment business have been volatile, touching highs of Sh541.3 million and lows of Sh310 million in the past five years. Carbacid says it is differentiating itself by catering to customers seeking pure carbon dioxide that is not based on alcohol manufacturing. The company added that there are emerging new uses for the gas, a move that could potentially broaden the market for all the players. “Our strategy as always is to ensure that we reliably deliver high quality products free of any alcohol base, which happily is a particular requirement of a large segment of the market for ethical reasons,” the company said. Among the alternative uses of carbon dioxide are freezing, meat processing and insect control in grain silos. Carbacid’s major customers have been food and beverage manufacturers that use the gas as a preservative or to enhance the flavour of their products.
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