Top Athi River Mining bosses jump sinking ship as Pradeep takes firm grip on the stern

When Athi River Mining (ARM) Cement made a Sh6.9 billion loss, the cost of running the company had suddenly shot up by 55 per cent.

Part of the Sh2.8 billion administrative cost went into compensating the firm’s board of directors that is silently slithering away from the company and the responsibility to safeguard shareholder interests.

The board, which meets at least four times annually and earned Sh220 million in fees, salaries and allowances in 2017, is responsible for protecting shareholder value. But they have partly overseen a dramatic decline from a high of Sh76 a share in July 2015 to a low of Sh2.90 in Tuesday’s trading.

Last week, the troubled cement maker lost its fifth board member this year. The firm informed investors that Mr Leonard Mususa had resigned with effect from June due to personal reasons.

“The board of directors record their sincere appreciation to him for his dedicated service, leadership,” the notice in the dailies read.

Since the beginning of the year, ARM has lost half of its board as it navigates financial tailwinds that have sunk it deep into debt and a streak of loss making.

Chairman Rick Ashley left the board and was subsequently replaced by Konstantin Makarov while Ketso Gordham and Pepe Maijer who represent interests of British development investment firm CDC were replaced with turnaround directors, Sofia Bianchi and Rohit Anand.

In April this year, ARM also lost its company secretary Ramesh Vora who has now been replaced by John Maonga.


Despite having a policy on conflict of interest, the troubled cement maker is selling assets to a firm owned by its CEO and member of the board Pradeep Paunrana with 10.6 per cent shareholding and indirect holdings of 15.2 per cent through Amanat Investment Limited.

The company announced it had reached an agreement to sell its fertiliser and mineral production businesses in Kenya to Swiss firm Omya and Pinner Heights Limited (PHL), a company owned by Paunrana, for Sh1.6 billion.

After buying the business, Paunrana will still have the exclusive say forcing ARM cement to manufacture and supply industrial mineral products for his outfit.

A further slap in the face was revealed when a local daily reported that the firm had further offered buyers of its non-cement businesses additional assets in Tanzania worth Sh854.6 million for free.

ARM has fallen deeper into the red posting a Sh6.9 billion loss in 2017 from a loss of Sh3.1 billion in 2016 putting in question its ability to meet its short-term obligations.

 “Ultimate responsibility for liquidity risks management rests with the board,” the firms auditors Deloitte said in the audited statements.

ARM is expected to settle a massive Sh13 billion within the year and Sh1 billion beyond the year but within the next five years according to its financial reports.

The firm owes Sh6.5 billion in bank loans, an improvement from Sh7.9 billion in 2016 and Sh1.4 billion to Aureos.

It also owes a corporate bond of Sh1 billion and Sh771 million in commercial papers.

Strain on their books can however be seen on the leaning to overdrafts which increased from Sh2.2 billion in 2016 to Sh4.5 billion last year.

Their debt also carries a currency risk since its dollar denominated loans stand at Sh8.8 billion ($86.1 million) while the Kenya shilling debt stood at Sh4.4 billion as at December last year.

In their books, the cement maker expects to get back Sh22.9 billion from related companies out of which they suspect Sh1 billion will not be recovered and have already provisioned for the loss.

Another contingent liability is a claim by the Kenya Revenue Authority which slapped the cement maker with a sh2.6 billion bill.