• ARM Cement, once the country’s second-largest cement maker, has been unable to recover from losses which started in the first half of 2015.
• The firm was placed under administration last August and its shares were suspended from trading at the Nairobi bourse.
Image: FILE
National Cement Company Ltd beat Oman's Raysut Cement to secure the acquisition of Athi River Minning's cement and non-cement assets in Kenya valued at Sh5 billion.
In December, the Oman-based firm had made a sh10.2 billion bid to acquire 70 per cent of the struggling cement manufacturer as part of its expansion plans into the East and Central African markets.
A month earlier, Nigeria’s Dangote Cement was approached about a potential transaction by advisers to ARM Cement, a source with direct knowledge of the matter told Reuters at the time.
ARM Cement, once the country’s second-largest cement maker, has been unable to recover from losses which started in the first half of 2015 and owes about $190 million (Sh19 billion) to a range of creditors, including local commercial banks.
Part of the outstanding debt includes Sh4.6 billion convertible debt owed to the African Finance Corporation, Sh2.5 billion in overdraft facilities owed to Stanbic Bank as well as Sh824 million owed to Standard Bank Ltd.
In 2017, the firm took additional overdraft facilities from Guarantee Trust Bank and UBA Bank valued at Sh550 million and Sh340 million respectively.
This prompted some of the creditors to place the cement maker under administration last August and its shares were suspended from trading at the Nairobi bourse.
Muniu Thoiti and George Weru from PricewaterhouseCoopers (PwC) took over management at the firm days after chief executive Pradeep Paunrana resigned.
Two months later, creditors approved the sale of a subsidiary or assets to reduce the company’s debt.
Despite a boom in ongoing infrastructure projects such as roads and phase two of the Standard Guage Railway coupled with continued real estate development, cement production has registered a gradual decline over the past two years.
Data by the Kenya National Bureau of Statistics shows cement production declined for the second year in a row in 2018, dropping 2.6 per cent to 6.07 million tonnes. Consumption, on the other hand, increased by 1.6 per cent to 5.95 million tonnes compared to 2017.
Cement firms have over the past few years raised concerns over the entry of cheap imports into the country sparking price and quality wars among local manufacturers as they compete for market share.
Devki Group chairperson Narendra Raval attributed the war to increasing inflow of substandard cement from regional firms. The group which owns National Cement produces Simba Cement with 20 per cent control of the local market.
“Those importing to Kenya are not monitored. Their cement is substandard and below the normal 50 kilogrammes. This is killing the local industry,” Raval said.
This has led to poor performance by local cement producers evidenced by Bamburi Cement, the leading market player issuing a profit warning for the second year running.
State-owned East Africa Portland Cement also issued a profit warning after its half-year losses deepened by 30.7 per cent to Sh1.26 billion.
The price wars are expected to worsen as the state moves to achieve the affordable housing pillar under the Big Four agenda.
The transaction between ARM and National Cement is subject to regulatory approvals, the statement from the administrator said.