Regulator seeks solution to Portland’s financial troubles

Portland Cement Plant Athi River taken on 1st September 2016. [PHOTO:WILBERFORCE OKWIRI]
Delay in resolving liquidity woes at the East Africa Portland Cement (EAPCC) has got the capital markets regulator worried. The regulator said yesterday it was consistently engaging the firm, even as the company completes another year in insolvency.

The State-owned cement maker was fined a paltry Sh50,000 last year for failure to issue a profit warning and was given three months to deliver a plan on how it would work itself out of negative working capital.

“EAPCC’s turnaround plan required certain actions by its major shareholders including the National Treasury. We are aware that engagements between the company and its key stakeholders are ongoing in an effort to address the issues facing the company. The authority is consistently engaging EAPCC on the matter,” Capital Markets Authority (CMA) said in an emailed response.

The firm told the Senate Committee on Trade and Industrialisation late last year that a Sh15 billion is the bare minimum required to get it back on its feet including settling a Sh1.4 billion labour suit as additional liabilities accrue.

“All of these are the subject of the ongoing engagements between the Authority and EAPCC,” CMA said.

The company’s books have deteriorated rapidly over the past year, pushing it Sh2 billion further into insolvency.

The Auditor General Edward Ouko said Kenya’s premier cement maker cannot pay its debts. “The Group’s current liabilities exceeded its current assets by Sh6 billion from Sh4.2 billion in 2017,” Ouko said. The cement maker had to rely on stripping some of its assets to boost its numbers after its operations widened losses. EAPCC made Sh3.5 billion operating loss in 2017 from Sh1.3 billion in 2016 with the Auditor General questioning its viability.

The producer of Blue Triangle brand, largely missing in outlets, says they have a new strategy to focus distribution on its own depots and to compete on pricing. “The company has remodeled the distribution channels for its products to place emphasis on company deposits,” Company Secretary Sheila Kahuku said.

The cement maker’s cost of stock and inventory was Sh89 million more than what it earned from selling the stock, making it suffer losses even before administrative costs could be factored in. “Revenue for the year declined by 25 per cent driven by constraints in working capital, increase in competitive pressures and the high cost of production which combined reduced output cement prices,” Ms Kahuku said.

The administrative expenses were Sh3.8 billion, higher than the Sh2.2 billion last year. According to EAPCC Managing Director Simon ole Nkeri, the company has 133 jobs vis-à-vis 1,600 employees.

The cement company, however, made money from disposing of its assets which may have massaged their revenue while increasing their woes.

Fair value gain on investment property was Sh11.3 billion, thus the listed parastatal made a Sh7.7 billion net profit for the year ended June 2018. In 2017 net losses for the year was Sh1.4 billion.

The company earmarked for privatisation owes creditors Sh10.9 billion and requires a further Sh2 billion to revamp its plant plus additional money for buying stocks and for working capital.

East Africa Portland CementCapital Markets AuthoritySenate CommitteeEAPC money