Construction shares fall on real estate slowdown

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Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

The share prices of companies linked to construction and real estate have been in the red over the past year due to slowdown in the sector’s activity in an economy that has shed jobs and seen stagnant wage growth.

Bamburi Cement share has declined by 55 percent to trade at Sh59 in the past 12 months, while East Africa Portland Cement is down by 8.1 percent to Sh14.25.

Another listed cement firm, ARM, remains suspended from trading after falling into financial difficulties and has already seen its Kenyan assets taken over by a new owner.

Crown Paints is trading at Sh62, representing a 22.98 percent decline, while East Africa Cables has shed 40 percent in the past one year to trade at Sh1.94 amid a liquidation threat by creditors.

Market analysts attributed this to the poor performance and reduced yields of the construction and real estate sector.

“The decline in the share prices is reflection of the decline in production and consumption in the cement sector since 2017. Demand for cement has reduced as activity in the real estate sector has declined. Meanwhile, producers have been forced to reduce their utilisation rate as demand for cement has decreased,’’ said Sarah Wanga, head of research at investment bank AIB Capital.

Real estate firm Home Africa—which is listed under the investment segment— is trading at Sh0.43, a 25 percent drop from a year ago.

Ms Wanga added that given individual households have historically been the largest consumers of cement, the loss of purchasing power due to job losses and a tough business environment for the self-employed was bound to affect the players in the sector.

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