High financing costs and increased costs of operation dampened power distributor, Umeme’s net profit for 2017, results announced by the company today show.
Despite an 8.7% growth in revenue from Shs1.36 trillion in 2016 to Shs1.48 trillion in 2017; a 40% rise in cost of financing from Shs42.6 billion to Shs59.7 billion, a 9% rise in cost of sales and a 12% rise in operating expenses conspired to cause a 73% decline in profits.
Cost of sales went up by Shs78.7 billion while operating expenses went up by Shs20 billion.
These and other costs saw profit reduce from Shs132 billion in 2016 to Shs35.5 billion.
According to Reuters, part of the rise in financing costs was attributed to the rise in the interbank benchmark lending rate after a surge in the London Interbank Offer Rate (LIBOR) – a benchmark for interest rates on some of its debt – and that “as a result of the above, the full year … profit declined.