Bamburi Cement 1H12 EPS down 16.6%y/y. Bamburi Cement Limited (Bamburi) released 1H12 performance figures marking 16.6%y/y (-6%h/h) drop in EPS to KES 6.38. While revenue growth was impressive (+16.9%y/y; -1.3%h/h), profitability disappointed - weighed down by 25.2%y/y (+1.4%h/h) rise in total costs. According to management, the rise in expenses was mainly driven by flow through effect of volatile fuel prices on cost of raw materials, power and transportation. Management also blamed the escalation in costs to a 70% rise in power costs in Uganda following the removal of Government power subsidy (while Uganda operations delivered 30.6%y/y jump in PAT, mainly driven by increased capacity, h/h PAT dropped 40.6% - somewhat supporting management’s argument of jump in power costs). Cash generated from operations was up 32.7%y/y, on improved working capital management. Cash held remained high at KES 7.665bn (equivalent to KES 21.12 per share), while total borrowings remained below KES 1.0bn. Management declared an interim dividend of KES 2.00 (unchanged). Overall, we are disappointed with the continued margin attrition (OPS margin 18.5% down from 20.7% in 2H11 and 23.9% in 1H11). Our think has been, after 34%y/y jump in total costs in FY11 (mainly driven by 83.1%y/y and 59.3%y/y rise in freight & energy costs) we would see some relief in FY12 on the back of a stable currency and continued energy substitution. Still on our expectations, on revenue, we still don’t have a clear understanding on how Bamburi is able to deliver reported figures - our thinking was, FY11 cement revenue growth of 26.8%y/y (versus 18.8% y/y growth in production) was largely achieved due to the impact of a weaker KES on USD export sales). After 1H12, performance we note our FY12 EPS estimate of KES 16.23 (+12.5%y/y & +54.4%h/h) looks demanding. On the positive, we note Bamburi is on course to beat our FY12 revenue estimate of KES 35.9bn (-0.9%y/y & -14.7%h/h). On valuation, based on FY11 figures, Bamburi remains attractive – EV/EBITDA of 6.4x versus ARM’s 13.86x. (sib)