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September 21, 2018

Limping firms on the spot as ARM woes bite

Nairobi Securities Exchange CEO Geoff rey Odundo observing daily trading at the bourse on August 22, 2017/ENOS TECHE
Nairobi Securities Exchange CEO Geoff rey Odundo observing daily trading at the bourse on August 22, 2017/ENOS TECHE

Capital Markets Authority yesterday suspended Athi River Mining Cement from trading at the Nairobi Securities Exchange after the firm was placed under administration on Friday.

A public notice said shares of the cement-maker will remain suspended from the bourse for seven working days.

“This is to inform you of the suspension in trading of Athi River Mining Cement Plc shares, following the placement of the company under administration pursuant to Section 534( 1 ) of the Insolvency Act, 2015,” said NSE in a notice.

ARM’s suspension is likely to open pandora’s box on other struggling firms at NSE especially in construction and manufacturing counters trading on the negative.

Financial reports of all five firms in the construction and allied segment of NSE show they posted negative results in the last financial year, with ARM posting Sh6.5 billion in losses up from Sh2.8 billion the previous year.

Other companies including East Africa Cables and East Africa Portland Cement reported losses of Sh662.8 million and Sh1.45 billion while Bamburi cement’s profits dropped 66 per cent to Sh1.97 billion from Sh5.8 billion.

Listed firms in the manufacturing segment are also undergoing financial difficulties. Mumias Sugar recorded an after-tax loss of Sh6.77 billion in 2017 compared with Sh4.75 billion loss the previous year.

Eveready East Africa started the reclassification process in June last year from manufacturing to commercial and services class at NSE after shutting down its battery plant in Nakuru in 2014; it has reported consistent losses.

Manufacturing companies are required to maintain positive working capital at all times, failure to which sanctions are imposed including a penalty of $100,000 (Sh10 million).

The cement maker benefitted from regulator’s 2015 guidelines to govern the suspension and eventual delisting of companies that flout listing regulations. The guidance gave CMA powers to institute immediate suspension of listed companies, if it deems fit, to protect the interest of the investors, pending review of the case.

Other listed firms facing turbulence include Uchumi Supermarket whose share was Sh1.50 yesterday from an initial Sh9.

In June, CMA raised a red flag on financial muscle of listed firms, stating that it was closely monitoring nine firms.

“The authority is closely tracking the performance of these companies and is engaging the majority shareholders and the government where it has significant interest, in order to get a clear path to protect their interests,” CEO Paul Muthaura said.

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