Listed manufacturer Crown Paints has shifted its Tanzanian offices from Dar-es-Salaam to Arusha as the firm moves to slash its operating costs by about Sh7 million annually in the loss-making subsidiary.
Crown Paints CEO Rakesh Rao said in an interview with Business Daily that the company is now paying Sh150 ($1.5) per square metre in Arusha, down from Sh500 ($5) per square metre previously paid in Dar es-Salaam.
The decision to relocate its offices comes months after the Nairobi Securities Exchange-listed paint maker said that its Tanzanian subsidiary is one of the most struggling and alongside the Ugandan and Rwandese units, pulled down its profits in the year to December 2018.
“We are cutting our operating expenses in Tanzania and we have already moved offices from Dar es Salaam to Arusha. The market has so far remained flat and we are reducing the costs before it picks up,” Mr Rao.
He added that the paint-maker is also transferring all the data entry jobs to Kenya in what is likely to cuts job in the Tanzanian subsidiary by about 30 employees.
Crown Paint’s regional subsidiaries have struggled in recent years, making a combined loss before tax of Sh275.4 million in the year to December 2018.
In a bid to keep them afloat, Crown Paints wrote off Sh908 million owed by the three subsidiaries according to disclosures in its 2018 annual report.
The amount was Sh379.8 million owed by Regal Paints Uganda Limited, Sh355.7 million for Crown Paints in Tanzania and Sh172.6 million by Paints Rwanda Limited.
The debt-to-equity transaction saw Crown Paints’ short term liabilities exceed its current assets by Sh601 million in the period with its external auditor EY saying the company risks weakening its financial position by maintaining support for the loss-making subsidiaries.
Crown Paints halted regional expansion plans two years ago, choosing to instead focus on stabilising the existing subsidiaries.
The firm’s net profit for the year ended last December fell by 17.68 percent to Sh183.8 million compared to Sh223.2 million in 2017.
In a bid to further grow its profits margins in Kenya, Crown Paints in growing its footprint with new deports, marked by the Sh30 million facility opened last week in Nyeri to serve the Mount Kenya region.
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