Displaying items by tag: ARM Cement
UK financier to take 40% stake in ARM
04 May 2016Kenya: The UK-based development financier CDC is set to acquire a 40% stake in ARM Cement, after the firm injected US$140m into the family-owned Kenyan cement manufacturer.
The CDC funds will allow ARM to retire expensive short-term loans that have been weighing down the company’s earnings. The CDC is owned by the UK’s Department for International Development.
“We are proud to back a founder-led frontrunner in East African manufacturing,” said Mark Pay, CDC’s managing director for equity investments. “This investment will strengthen a company (that is) making a difference to the local economy, bringing jobs and lower-cost raw materials to a region traditionally dependent on imports.”
ARM Cement to finalise investor talks by mid-April 2016
04 April 2016Kenya: ARM Cement expects to conclude talks on a foreign investor taking a US$140m stake in the company by 15 April 2016. The investment is expected to be concluded by June 2016, the Kenyan cement producer said in a statement sent to the Nairobi stock exchange and reported by Mist News.
“The board and management of the company believe that the investment would, if made, strengthen the financial position of the company as it executes its regional growth plans,” said ARM Cement in the statement.
ARM Cement announced in December 2015 that it was in talks with a potential investor. India’s UltraTech Cement was linked to the deal in January 2016. ARM Cement was said to be facing ‘liquidity challenges’ by the Capital Markets Authority in March 2016. The Kenyan cement producer has previously said that the foreign investment will be in the form of a seven-year convertible preference shares. This is not expected to reach the threshold requiring a mandatory takeover bid on conversion to equity in the company. Funds from the investment of up to US$110m will be used to repay company debt. The rest of the balance will go towards expanding the company’s cement business.
UltraTech may buy stake in Kenya’s ARM Cement
12 January 2016Kenya/India: UltraTech Cement Ltd may buy a controlling stake in Kenya's ARM Cement Ltd. ARM announced on 23 December 2015 that it was in talks with an unidentified institutional investor about a US$125m investment.
ARM Cement swings to loss on currency turmoil
27 October 2015Kenya: ARM Cement has posted an after tax loss of US$4.62m for the first nine months of 2015 compared to a US$10.8m profit at the same period of 2014. The company said that the losses were largely attributable to the depreciation in regional currencies against the US Dollar.
ARM Cement's revenue for the first nine months of 2015 rose by 7% year-on-year to US$115m thanks to increased cement sales in Kenya and in Tanzania. While domestic cement demand grew by more than 10% during the period, "the sharp depreciation of both the Kenyan and Tanzanian currencies in the nine months has resulted in an unrealised exchange loss," said ARM Cement in a statement. "The fundamentals for continued economic and construction sector growth remain strong despite the recent currency depreciation and increase in interest rates."
ARM Cement’s clinker plant will boost margins
14 September 2015Kenya: Kenya's ARM Cement expects profitability to improve now that it produces its own clinker for its east African cement plants, according to managing director Pradeep Paunrana.
Reuters reported that ARM Cement posted a pre-tax loss of US$4.5m in the first six months of 2015, which the company blamed on unrealised foreign exchange losses associated with borrowing for its new clinker plant, a vital raw material for cement.
Paunrana said that the new 1.2Mt/yr clinker plant was operating at about 75% capacity since production began in April 2015. "What this essentially means is that our production cost has come down drastically because imported clinker is much more expensive, at least 70 or 80% more expensive than what we are producing locally," said Paunrana. "So we expect improvement in our margins both in Kenya and in Tanzania with the production of our own clinker." He added that ARM was also selling clinker to other companies in Tanzania, the Democratic Republic of Congo, Rwanda and Burundi.
ARM's operating margin was 13.4% in 2014 according to Thomson Reuters data, compared with an industry median of 15.5%. ARM's Tanzanian plant has 1.5Mt/yr of cement production capacity, while its Kenyan plant can produce 1Mt/yr and its plant in Rwanda can make 100,000t/yr.
Paunrana said that he expected an improved financial performance in the second half of 2015, citing the 9% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half to US$18.4m. "The company is still very profitable, especially now that we have more clinker production and more volume growth," said Paunrana. He added that earnings in foreign exchange were rising and that ARM now had an advantage over some rivals. "We are keeping our margins steady and are now becoming a lot more competitive against those who import either clinker or finished cement."
Cement signals – import row in Kenya
08 July 2015Kenyan cement producers kicked off this week about Chinese cement imports for the Standard Gauge Railway Project in Kenya. Local producers, including ARM Cement and Lafarge, have asked the Kenya Railways Corporation to explain why the Chinese-backed project is importing cement. Project builders the China Rail & Bridge Corporation (CRBC) has imported 7000t of cement so far in 2015 according to Kenya Ports Authority data.
Project completion is planned for 2017 with a requirement of 1Mt of cement. If CRBC carried on this rate then, roughly, the project might only use 42,000t of imported cement if the import rate holds. This is less than 5% of the estimated requirement. However, cement imports increases into Kenya have stayed steady since 2012. Imports rose by 2000t from 2013 to 2014. CRBC's imports will stick out significantly in 2015.
Kenya National Bureau of Statistics (KNBS) data places Kenyan cement production at 5.8Mt in 2014, an increase of 16.3% from 5.1Mt in 2013. Production growth has been steadily building since the late 1990s with, more recently, a dip in the rate of growth in 2011 that has been 'corrected' as the growth has returned. Consumption has risen by 21.8% year-on-year to 5.2Mt in 2014 with imports also rising and exports dropping.
Imports for the railway project are duty free as ARM Cement Chief Executive Officer Pradeep Paunrana helpfully explained to Bloomberg. Producers have also recently upgraded their plants to specifically supply 52.5 grade cement to the project. Given this, it is unsurprising that local Kenyan producers, including ARM Cement and Lafarge, are complaining about this situation, especially given the increasingly pugnacious African response to foreign imports led by Dangote and companies in South Africa. Both ARM and Lafarge hold integrated plants and grinding plants in Nairobi and Mombasa. This is the route of the new railway line.
The backdrop to this is that the Chinese cement industry is struggling at home as it adjusts to lower construction rates and reduced cement production growth. Profits made by the Chinese cement industry fell by 67.6% year-on-year to US$521m for the first quarter of 2015, according to National Development and Reform Commission (NDRC) statistics. At the same time the Shanghai Composite, China's principal stock market, has seen the value of its shares fall by 30% since June.
Although it is unclear where the cement imports in this particular row are coming from, informal or formal business links between large state controlled corporations such as a China's major cement producers will always be questioned by competitors outside of China for both genuine issues of competitiveness and simple attempts to claw more profit. If the Chinese cement producers are sufficiently spooked or they really start to lose money then what is to stop it asking a sister company building a large infrastructure project abroad to offer it some help? Or it might consider asking the Chinese bank providing 90% of the financing towards the US$3.8bn infrastructure project to force the Kenyan government to offer more concessions to foreign firms. Meanwhile one counter argument goes that Kenya has a growing construction market with a giant infrastructure project that may unlock the region's long-simmering low cement consumption per capita boom. The Kenyan government may face some difficult decisions ahead.
Kenya: According to Reuters, Kenyan cement producers have said that they are being left out of a US$3.8bn railway project that China Rail & Bridge Corporation (CRBC) is building, after the company gave an assurance it would source all of the raw materials domestically.
Companies including Lafarge South Africa's Kenyan unit and ARM Cement have asked Kenya Railways Corporation, the implementing agency, to provide clarity on CRBC's local procurement plans, five months after work on the project started, according to ARM Cement CEO Pradeep Paunrana. Kenya Ports Authority data show that CRBC has imported at least 7000t of cement so far in 2015.
"There was an assurance that all of the cement would be supplied by local producers," said Paunrana, who is also chairman of the Kenya Association of Manufacturers. "There has not been transparency on how much we will supply and we don't understand why they are importing cement when we can clearly supply cement to their specifications."
The 'Standard Gauge Railway Project' (SGR) is Kenya's biggest investment in infrastructure since it gained independence from Britain in 1963. The Export-Import Bank of China is funding 90% of the railroad, which will connect Nairobi to Mombasa, East Africa's biggest port. It is scheduled to be completed by 2017. Kenya's Treasury is pinning its 7% growth target for 2015 partly on activities generated during construction of the 609km link. In June 2015, treasury secretary Henry Rotich allocated US$1.46bn to the project for the 2015 - 2016 financial year.
The SGR project requires 1Mt of cement, all to be sourced in Kenya, according to a master list of supplies that the manufacturers' association was given by CRBC. Kenya is a higher cost producer of cement than China and imports for the project are duty-free, according to Paunrana. Kenya Railways spokeswoman Mary Oyuke has said that the company isn't importing cement because the material is available locally and ARM and Bamburi are already supplying the project.
ARM and other producers, including Lafarge's unit Bamburi Cement, have upgraded their plants to produce the 52.5 grade cement required by the contractors. The enhancements cost 'several million dollars' and were commissioned on the understanding that CRBC would buy the cement from domestic manufacturers. "We undertook significant investments in an endeavour to seamlessly supply cement to the project, including long-term agreements with transport companies to make deliveries," said Bamburi CEO Bruno Pescheux. "It is our hope that the project will continue to purchase cement locally rather than import, in light of the above investments." Bamburi supplied 20,000t of cement in April 2015.
ARM Cement’s 2014 pre-tax profit flat
26 March 2015Kenya: ARM Cement posted a pre-tax profit of US$22m for 2014, up by 1% from 2013. ARM's revenue fell by 3% year-on-year to US$150m, mainly because there was no additional capacity expansion during the year.
ARM Cement has predicted that 2015 will be better, with growth in turnover and profit.
"The cement markets continue to grow at double digits with significant demand from the infrastructure segment," said ARM in a statement. Booming economies in east Africa have buoyed cement demand in recent years, but local firms are preparing for increased competition from new entrants like Nigeria's Dangote Cement.
Kenya: Strong sales of cement and fertiliser have boosted Kenya's ARM Cement's pre-tax profit by 20% to US$13.68m in the first half of 2014. Total revenue jumped by 16% to US$86.6m, after cement sales rose by 10% in Kenya and by more than 33% in Tanzania. The improved sales were attributed to an improved distribution network.
"The east African regional economies are growing briskly and demand for cement, as well as the other products, are expected to grow further," said ARM. The company expects earnings to grow further in the second half of 2014, mainly due to improving margins driven by investments in its plants in Tanzania and Kenya.
ARM has invested a total of US$171m in a clinker plant in Tanga, Tanzania and a cement plant in Dar es Salaam, also in Tanzania. The plants have a combined capacity of 1.8Mt/yr. The investments have helped the earnings before interest, taxes, depreciation and amortisation (EBITDA) to hold steady at 24% in the first half of 2014, defying pressure from higher input costs, such as energy.
ARM Cement acquires Kigali Cement
03 July 2014Kenya: Kenya's ARM Cement has completed the acquisition of Rwanda's Kigali Cement as it continues expanding its East African market.
ARM, which has held a 35% stake in the only privately-owned cement company in Rwanda since 2011, Kigali Cement, bought out the remaining 65% stake held by various shareholders to take complete control of the firm. The deal was finalised in April 2014. Kigali Cement, which had US$1.9m in net assets in 2013, has a cement production capacity of 100,000t/yr, which is expected to increase with further ARM investments.
"We finally acquired a 100% equity stake and full control of our Rwanda grinding plant," said ARM's chairman, Rick Ashley. He added that ARM also plans to increase its capacity and market share using its flagship brand, Rhino Cement.
The value of the deal was not disclosed, but it is estimated to cost over US$1.2m based on Kigali Cement's net asset value. The purchase will be financed by banks, according to Pradeep Paunrana, ARM's chief executive.
The acquisition is part of ARM's expansion plans, which seeks to improve sales in Rwanda and neighbouring markets. ARM will leverage on its new acquisition to expand its production and distribution network in East Africa. Ashley said that ARM will seek further measures to increase its market presence in Kenya, East Africa's largest economy, as well as Rwanda and Tanzania, completing ongoing projects and focusing on new markets in the region.
ARM is expected to commission Tanzania's Tanga plant, which holds a production capacity of 1.2Mt/yr of cement, in the fourth quarter of 2014. It will also start construction of its US$300m Kitui plant in Kenya in October 2014.