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Bamburi scraps sale of Mombasa plant

BUSINESS NEWS
By Macharia Kamau | January 6th 2021

Bamburi CEO Seddiq Hassani says the Mombasa-based plant will not be sold as was earlier planned after the would-be buyer failed to meet the conditions precedent to the agreement. [Wilberforce Okwiri, Standard]

Bamburi Cement has shelved plans to sell its Mombasa-based precast products plant after a bid to offload it last year, fell through. 

The company had signed an agreement with Yellow House Ltd, but the buyer failed to meet the agreed conditions. 

The plant is housed by the cement maker’s subsidiary, Bamburi Special Products, which has another factory in Athi River that produces both ready-mix concrete and precast concrete blocks.

The Competition Authority of Kenya approved the deal in March last year but last month notified the public that the transaction was not completed “due to the termination of the agreement by parties”.

Continue operating

Bamburi Cement Chief Executive Seddiq Hassani told The Standard they would continue operating the plant with no immediate plans to dispose.

“We had decided to sell it to Yellow House but, unfortunately, the company did not meet the conditions precedent to the agreement and the takeover was cancelled. We do not know the factors that led to their failure to meet the conditions and whether it is related to Covid-19,” he said.

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“We have kept the operation in Mombasa and continue to operate it within our Bamburi Special Products operations.”

Mr Hassani said Bamburi had decided to sell the plant partly due to logistical challenges that came with overseeing operations in Mombasa while the company’s main office is in Nairobi.

He said the Athi River plant is capable of servicing its clientele for precast products, many of them located in Nairobi and its environs.

“We wanted to sell the precast operation in Mombasa so that we can focus on our Nairobi operation. The Mombasa operation is small and difficult to operate from Nairobi and the market is mainly around Nairobi,” the CEO said.

In the six months to June 2020, Bamburi’s revenues declined 13 per cent to Sh16.2 billion from Sh18.7 billion over a similar period in 2019. It attributed the decline to Covid-19 restrictions put in place in March to contain the spread of the disease.

This resulted in a drop in activities across different economic sectors, including building and construction.

Hassani, however, said the industry had started to recover in the second half of 2020 following the easing of the restrictions.

He expects the recovery to continue this year, banking on individual home owners as well as big ticket infrastructure projects.

“The cement and construction sectors are mainly driven by individuals building homes, which is about 70 per cent of the market, with the balance mainly driven by the big projects,” he said. 

“There is a positive trend among individuals building homes or undertaking such projects over the second half of 2020.”

He said there are big infrastructure projects launched in 2020 and will continue this year.

“They will impact the cement sector positively in 2021. There are also other projects such as roads and dams whose construction is set to commence in 2021, if they are launched, then it will drive consumption of cement,” added Hassani.

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