Costs related to expansion and delays in opening up new branches ate into Uchumi Supermarket’s profits during the six month period ended December last year resulting in a 34.14 per cent drop in profit before tax.

The Nairobi Securities Exchange listed company, which owns a chain of supermarkets in Kenya, Uganda and Tanzania on Monday posted Ksh131.93 million ($1.53 million) in profit before tax as at the end of December 2012 compared to Ksh204.25 million ($2.36 million) posted as at the end of December 2011.

“It is attributed to delays in opening branches. Branches opened later in the year were supposed to be opened in July and August last year and when there are delays you incur certain fixed costs,” said Chadwick Okumu, finance manager, Uchumi Supermarkets.

Operating expenses went up by 18.09 per cent to Ksh1.54 billion ($17.98 million) in the six months to December last year compared to Ksh1.31 billion ($15.16 million) the previous year while net sales rose marginally to Ksh7.58 billion ($88.21 million) from Ksh7.5 billion ($88.85 million) respectively.

As at the end of June 2012, the company had a total of 24 branches, 19 of which were in Kenya, one in Tanzania and four in Uganda.

In September, Uchumi opened a branch in Ongata Rongai and its branch network is set to increase to at least 30 across the region and locations targeted include Eldoret, Kisii, Mombasa, Kisumu, Dar es Salaam and Kampala.

Mr Okumu said that sales in Tanzania and Uganda had improved and that even though some individual branches in these two countries may not have broken even, some were already making profits.

“Tanzania is about a year old but if you look at the top line, we have done more in the half year than we did in the entire last year. In Uganda we have four branches most of which have been doing profits but as a pool they have been making losses but as at the half year the losses were far much less than last year,” said Mr Okumu.

Uchumi Supermarket’s share shed 1.28 per cent on Monday after the results were released and closed at Ksh19.35 ($0.22).

In the full year to June 2012, Kenya’s contribution to sales, its main market, had dropped even though its subsidiaries in the region made losses mainly because of set up costs.

The diversification plan into the region is expected to cut the supermarket chain’s reliance on its main market and grow its profits in future.

Kenya contributed 85.85 per cent of total sales in the twelve months ended June 2012 down from 90.93 per cent over the same time period in 2011, Uganda’s share grew to 11.54 per cent from 9.07 per cent and Tanzania contributed 2.61 per cent during the period when combined sales grew by 28.14 per cent.

Uchumi plans to sell 100 million shares to existing shareholders through a rights issue and cross list the company’s shares on the Uganda Securities Exchange, the Dar es Salaam Stock Exchange and the Rwanda over-the-counter market.