State cement maker East African Portland Cement Company is seeking to raise Sh2 billion to fund staff layoffs that will see hundreds of the firm’s employees sent home.
This follows a year-long turnaround process the company’s management hopes will reverse the fortunes of the ailing firm. “We spend up to 30 per cent of our revenues on staff costs and this is not sustainable, so we are looking at raising between Sh500 million and Sh2 billion for a voluntary retirement process,” explained EAPCC Managing Director Mr Simon Ole Nkeri.
Mr Ole Nkeri maintained that the exercise will be voluntary and priority will be given to employees approaching retirement age. Last week, the firm’s scheduled Annual General Meeting was called off at the last minute after it appeared that the company’s auditors had not turned up.
“Last week, there were a lot of shareholders who turned up and we went back home disappointed and the board has not explained to us convincingly the reason for putting off the AGM,” said Mr Nzau Jones, one of the shareholders.
EAPCC has in the past years been embroiled in controversy over allegations of corruption and mismanagement that threatened to scuttle the operation of what was once a leading cement maker in the region.
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Its financial performance for the period ended June 30, 2016, showed the cement maker’s net profits shrunk by 42.1 per cent to Sh4.2 billion. In the same period, expenses grew by over half a billion shillings, plunging it into a Sh1.58 billion loss from operations. The firm’s management is now upbeat that a turnaround process instituted last year will bear fruit.
“We have conducted a forensic audit to identify some of the loopholes that were causing leakages in the company,” explained Ole Nkeri. “The board has received the report and we will be making its findings public over the next two weeks.”
SELL PART OF ITS LAND
The firm is also looking to reach out to various governmental organs including the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Prosecution in a bid to prosecute those implicated in the report.
“I cannot go into the details of the report at the moment but in the next two weeks we will make it public and we are working with the necessary stakeholders to implement it fully,” he said. Auditor-General Edward Ouko last year flagged the firm’s financial records and questioned the firm’s solvency after operating losses for the last financial year tripled.
“The group incurred a loss from operations of Sh1.5 billion during the year ended June 30, 2016 with the group’s current liabilities exceeding its current assets by Sh2.8 billion,” he stated.
The firm is also optimistic that the ongoing reforms in its corporate governance structure is already bearing fruit. “In the last six months we have been operating on our own cash flows without borrowing from commercial banks and we have also frozen employment for seven months,” he explained.
Late last year, the firm announced it would sell part of its land and cut its staff to turn around its dimming fortunes. According to EAPCC chairman William Lay, the cement maker has 15,000 acres of prime land that could fetch more than Sh10 billion if disposed of. The move for the Nairobi Securities Exchange-listed firm follows the Government’s audit report that showed that it had sunk into insolvency.
An audit report by Deloitte on behalf of the Auditor-General showed the firm’s current liabilities had surpassed its current assets by Sh2.79 billion, putting it in a difficult situation to meet its one-year obligations.