Ted Grayson, the finance director at Car and General, has not seen a tougher period than the second half of 2011 in the past five years.

The finance honcho at the Nairobi Securities Exchange (NSE) listed distributor of generators, motorbikes and engineering products, reckons managing financing costs has never been this difficult.

Threatened corporate profits are forcing company finance heads to make tough choices in re-engineering their strategies to reduce exposure to risks and appease shareholders with the forecast of a difficult year in mind.

Mr Grayson, who has held his position for 20 years — making him one of the longest serving finance directors in any NSE-listed company — says the past six months of 2011 were his hardest as the Kenyan currency touched an all time low against the dollar and interest rates rose sharply.

The effects of the high interest rates and volatile shilling can be seen in Car and General’s 45 per cent rise in finance costs in the 12 months to September 2011.

Car and General’s interest expense rose to $2.2 million in the 12 months to September 2011 compared with $1.5 million for the same period last year.

The rise in finance cost was brought about by a $6.2 million loan to expand their portfolio of commercial properties and to aid their working capital requirements. Mr Grayson’s tale is shared by many other finance directors in the region whose companies over the past one year have seen a steep rise in financing costs because of the high interest rates and the volatile shilling.

The high finance costs reduce profitability and also eat into working capital because of the high interest rate payments.

Interviews done by The EastAfrican with a number of finance directors reveal that rising interest costs — which have forced companies to turn to cheaper loans in foreign currencies — are bringing about a shift in business models where many of the firms are looking to slash their inventories and sell goods on cash as opposed to credit so that they borrow less.

Finance executives say they have been more aggressive in their treasury departments, which monitor and advise on the handling of foreign currency fluctuations.