Lifeline for ailing cement firm as State lines up new investors

Trade and Industrialization Cabinet Secretary Peter Munya, arrives at Kibini Primary School, in Kajiado East during the opening of a class room constructed by the East African Portland Cement. [Peterson Githaiga]

Ailing cement maker, East African Portland Cement (EAPCC), could soon be out of its death bed after the State announced it is in talks with strategic investors to bail out the firm.

Trade and Industrialisation Cabinet Secretary Peter Munya said the cement manufacturer, which had indicated that it requires at least Sh15 billion to stay afloat, has the potential to stand on its feet again if it gets the said cash injection.

“We as the Government are kin on reviving EAPCC and we have carried out due diligence on the existing loopholes leading to the losses,’’ said the CS at Kibini, Kajiado County on Monday.

He said the planned sale of the pioneer cement manufacturer’s land alone would not be enough to pull it out of its current financial woes, having posted a Sh1.26 billion loss for the half-year to December last year.

Mr Munya said the Government had already started laying the groundwork for the revival of the company, including the change of management and modernising its ageing plant in Athi River.

According to the firm’s financials released last week, it can barely meet orders for its Blue Triangle cement and its cash position is negative.

Its insolvency also increased by Sh1.3 billion in just six months. In a similar period last year, the company posted a Sh969 million loss but had managed to bring in revenues amounting to Sh3 billion. The company had pegged its turnaround on the expected approval by the State to sell part of its land, which could rake in between Sh10 billion and Sh15 billion, according to its estimated valuations.

However, time is not on the firm’s side, with its balance sheet falling apart as the Government drags its feet in approving the sale of the land, with creditors growing impatient by the day.

EAPCC is grappling with a Sh10.8 billion debt, with its biggest creditor being KCB Group, which it owes Sh4.5 billion.

Chairman Edwin Kinyua told The Standard on Monday the company is currently operating at 50 per cent production due to the financial constraints, making its operations in the long-term untenable. “At the moment, the company is on its knees, but there is hope if the systems are streamlined, it will in the next one year be profitable,’’ he said.

However, Mr Kinyua, who took office months ago, said the ongoing turnaround plans being spearheaded by the Industrialisation Ministry had helped to keep creditors at bay at least for the time being.

“Our creditors are now calm and we have reached a consensus that they do not auction our property and instead give us a grace period to repay the outstanding debts,’’ he said.

The firm’s current liabilities exceed current assets by Sh7.3 billion, worsening from an insolvent position of Sh6 billion in June last year.

EAPC said it expected to lower costs on laying off extra workforce under the ongoing staff rationalisation programme, having already laid off over 500 workers who are currently demanding dues amounting to millions, and outsourcing non-core administrative services.

According to its financial results, the firm, however, managed to restructure some of its loans, which reduced finance costs by 53 per cent from Sh313 million in 2017 to Sh204 million to December last year.