Displaying items by tag: ARM Cement
Kenya: The International Finance Corporation (IFC) says it is still considering investing in ARM Cement after it entered administration in late August 2018. IFC Kenya Country Manager Manuel Moses said that the World Bank institution was waiting for the outcome of the administration process to complete to see if a ‘good proposal’ would emerge, according to the Standard newspaper. Moses made the comments while unveiling the IFC’s investments in Sub-Saharan Africa in 2018.
The Kenya cement producer has been placed into admiration for 12 months to attempt to solve its debt problems. The IFC was previously set to take over loans worth US$120m at ARM Cement in July 2018 and was also interested in an equity stake.
ARM Cement looking for buyer of Kigali Cement plant
24 September 2018Rwanda: Kenya’s ARM Cement is set to auction off its Kigali Cement plant in Nyarugenge District for a second time, following a first attempt. The company forced a legal postponement to the first auction when offers for the unit failed to reach a level it deemed acceptable, according to the New Times newspaper. The only bid it received was for US$113,000 a figure significantly short of the estimate US$1.4m market value of the plant. Kigali Cement operates a 0.1Mt/yr plant.
Kigali Cement plant is being sold in order to pay its creditor, Rwanda Enterprise Investment Company (REIC) in a long running dispute between the companies. ARM Cement owns Kigali Cement but REIC has held shares in it since 2008. ARM Cement acquired a stake in Kigali Cement in 2010 and later took over the management of the company in 2014. Meanwhile, ARM Cement entered administration at home in Kenya in late August 2018.
ARM shares suspended for another 21 days
31 August 2018Kenya: The Capital Markets Authority (CMA) has extended the suspension of ARM Cement’s shares from trading on the Nairobi bourse for a further 21 working days. According to a public notice the shares of the cement maker will remain suspended until 27 September 2018.
“The extension of suspension in trading of the company’s shares takes effect from 30 August 2018 and shall remain in force for a further 21 working days,” said the NSE.
ARM Cement, which is grappling with US$140m of debt, was previously suspended from the bourse for seven working days from starting 20 August 2018.
ARM Cement recovery threatened by loss of mining licences
28 August 2018Kenya: Any potential financial recovery of ARM Cement could be threatened by the loss of its mining licences. Local legislation lists insolvency as a condition that could trigger suspension or revocation of a mining licence, according to the Business Daily newspaper. The cement producer was placed into administration by UBA Bank in mid-August 2018, with PricewaterhouseCoopers staff appointed as administrators. PWC’s Muniu Thoithi said that the company was approaching the government on the issue.
ARM Cement twisted in Kenya
22 August 2018It’s been a tough week for ARM Cement with the announcement that PricewaterhouseCoopers placed the company into administration on 18 August 2018. Given the performance of the company of late, this is not a surprise. It reported a growing net loss of US$55m in 2017 due to poor demand in Kenya and Tanzania.
First, the company made a series of personnel changes to the board of the company at the start of last week, according to Business Daily and other local press. This was led by the announcement on 13 August 2018 that Pradeep Paunrana would step down as the chief executive officer (CEO). This is significant since Paunrana’s father Harjivandas set up the company, previously known as Athi River Mining (ARM), in 1974. Paunrana was reported as owning 9% share in the company in late 2017 with his family controlling a further 14%. He will remain as a board member. Paunrana’s departure was also joined by Wilfred Murungi who stepped down as chairman following 24 years as a director of the firm and Surendra Bhatia, who will retire as deputy managing director. Although ARM Cement is yet to announce who its new CEO will be it has said that Linus Gitahi will become the new chairman and he has also been appointed as a non-executive independent director. Former Lafarge executive Thierry Metro has also been appointed as a non-executive independent director.
Then, over the weekend PricewaterhouseCoopers (PWC) announced in the local press that it had placed the beleaguered company into administration. Muniu Thoiti and George Weru have been appointed as the lead administrators tasked with the job of either rescuing the company or preserving the best possible value for its creditors. On 20 August 2018 the local stock exchange, the Nairobi Securities Exchange, suspended trading of ARM Cement for seven days.
ARM Cement blamed its woes in 2017 on elections in Kenya causing reduced cement demand, a coal import ban in Tanzania causing production issues at its Tanga cement plant and increased competition in both countries. Those last two reasons carried resonance this week with the news that the Petroleum Development Corporation and Dangote Industries Tanzania had signed a long-term gas deal. Dangote Cement has also had energy supply problems in the country, being forced to resort to diesel generators at its Mtwara plant. Due to this its 3Mt/yr cement plant only sold 0.2Mt of cement in the first half of 2018, a decrease of 48% year-on-year from the same period in 2017. The forced reliance on diesel also caused earning losses that negatively affected its wider Pan-African area margins.
The general consensus in the local press is that the CDC Group forced the latest changes in management. The UK government-backed investment company owns a 41% stake in ARM Cement. In June 2018 it replaced two of ARM’s board members and appointed a new executive director and a new company secretary following resignations. CDC Group injected US$140m into the firm in mid-2016 in return for a 40% stake in the business. When the Nairobi Securities Exchange suspended trading, ARM Cement shares were a tenth of the value CDC Group paid for its stake. Given that the share value of ARM has steadily fallen since 2016, the question that occurs is: why did CDC Group take so long before taking action?
Two thoughts occur at this point. One: whatever else emerges in the coming weeks and months about how ARM Cement has ended up in administration, it is unfortunate that a burgeoning multinational producer took a hit in more than one country at the same time in an area with such growth potential for construction. As has been proved, market potential and performance are not the same thing. Two: if this is any indication of how the UK government will act in the post-Brexit world generally, then investing in pound sterling assets before the end of March 2019 may be unwise.
Nairobi Securities Exchange suspends trading of ARM Cement
21 August 2018Kenya: The Nairobi Securities Exchange has suspended trading of ARM Cement following the company going into administration. The suspension took effect from 20 August 2018 and will last for seven days, according to Reuters. On 18 August 2018 PricewaterhouseCoopers said that the cement producer had been placed into administration following the resignation of its chief executive officer (CEO) Pradeep Paunrana. However, Paunrana intends to remain on the board of the company. PricewaterhouseCoopers has appointed Muniu Thoiti and George Weru as joint administrators.
In June 2017 ARM Cement reported that its net loss more than doubled to US$55m in 2017 due to poor demand in Kenya and Tanzania. UK-government investor CDC Group, which holds a 41% stake in the company, then forced the replacement of board members Ketso Gordhan and Pepe Meijer with Sofia Bianchi and Rohit Anand.
Kenya: The International Finance Corporation (IFC) is set to take over loans worth US$120m at ARM Cement. UK-government investor CDC Group, which owns a 41% stake in the cement producer, will also loan it US$20m, according to the Business Daily newspaper. The IFC loan is expected by mid-2019 and the CFC loan will arrive by the end of September 2018. The IFC has also proposed a US$50m equity investment in ARM Cement but chief executive Pradeep Paunrana wants to wait until his company’s share price returns to normal to avoid the company being undervalued.
The cement producer reported a loss of US$55m in 2017 due to poor demand in Kenya and Tanzania. It said it was undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems.
Update on Kenya
04 July 2018Congratulations are due to Bamburi Cement this week after the completion of a new production line at its Nairobi grinding plant. The new US$40m line will add 0.9Mt/yr of cement production capacity to the unit, bringing its total to 2.4Mt/yr when it is commissioned towards the end of 2018. Together with the subsidiary of LafargeHolcim’s integrated plant at Mombasa the company will have a production capacity of 3.2Mt/yr.
Graph 1: Cement production and consumption in Kenya 1999 - 2017. Source: Kenya National Bureau of Statistics.
As Graph 1 shows above it is an interesting time to open new production capacity in the country. Both production and consumption fell for the first time since 2000 in 2017. Production fell by 8.2% year-on-year to 6.2Mt in 2017 from 6.7Mt in 2016 and consumption fell by a similar amount. The change was blamed on reduced demand for building materials in the construction sector occurring at the same time as a fall in the value of building plans approved in 2017. The country also suffered political uncertainty as its general election in August 2017 was subsequently annulled and repeated in October 2017.
With Global Cement Directory 2018 data giving Kenya a cement production capacity of 5.2Mt/yr from five producers and at least four grinding plants with a capacity of 4.6Mt/yr it looks like the country is in an overcapacity phase. The question for producers like Bamburi Cement is whether 2017 is just a temporary blip or not. After all, as per usual for many African countries, the demographic pressure for development to happen and per capita cement consumption to grow seems ineveitable.
Bamburi Cement is not alone in betting on growth. Also this week the Kenya Port Authority recevied four hoppers from the UK’s Samson for the Port of Mombasa. The hoppers will be used to import clinker, coal and gypsum at the site. Earlier in February 2018, National Cement opened a 1.2Mt/yr integrated plant in Kajiado County. On the larger scale Nigeria’s Dangote Cement has been preparing to open two cement plants, near Nairobi and Mombasa respetively. However, these project were reported delayed to 2021 in its annual report for 2016 around the time the company faced problems at home due to a local financial recession.
Meanwhile local producers have faced pressure so far in 2018. Bamburi Cement reported a 6% fall in turnover to US$357m in 2017 that it blamed on the weather, the elections and lower construction activity. Other producers have had a harder time of it with the East African Portland Cement (EAPC) reportedly having to rely on a land sale to remain solvent in April 2018. ARM Cement has also been forced to sell assets to remain operational. Its loss for 2017 more than doubled to US$55m. Amid the problems the UK-government investor CDC Group, which holds a 41% stake in the company, replaced board members of the company in a likely bid to shore up the situation.
It’s into this kind of situation that Bamburi Cement has opened its new plant. On the plus side though it is a grinding plant so it should be able to maximise the company’s use of clinker from either within the country or from imports from other LafargeHolcim operations elsewhere. In its press release for the new unit the company pinned its hopes on anticipated growth in domestic housing and infrastructure projects, backed by government schemes for affordable housing and roads. With the rating agency Moody’s having issued a report this week about the relative reslilence of the Kenyan economy despite recent shocks such as last year’s elections, Bamburi Cement may yet have the last laugh.
ARM Cement to sell non-core assets
18 June 2018Tanzania: Kenya’s ARM Cement has improved a deal to sell its non-cement businesses by adding additional assets in Tanzania worth US$8.5m for free. Previously, the company said it had reached an agreement to sell its fertiliser and mineral production businesses in Kenya to Switzerland’s Omya & Pinner Heights, a company owned by its ARM’s chief executive officer (CEO) Pradeed Paunrana, for US$15.8m, according to the Citizen newspaper. ARM has added in its annual report
that potential buyers could acquire its non-cement operations in Tanzania for free.
The cement producer reported a loss of US$55m in 2017 due to poor demand in Kenya and Tanzania. It said it was undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems.
Kenya: CDC Group has replaced its board members at ARM Cement Ketso Gordhan and Pepe Meijer with Sofia Bianchi and Rohit Anand. The UK government-backed investment company owns a 41% stake in the company. In addition ARM Cement has appointed Konstantin Makarov as its new executive director, replacing Rick Ashley who resigned in May 2018, and John Maonga as its company secretary. Maonga succeeds Ramesh Vora who resigned in April 2018.
Bianchi worked as head of Special Situations at Blue Crest Capital, a European hedge fund, from 2007 to 2016. She brings experience in investment roles from sectors including mining and telecommunications. Bianchi has an MBA from the Wharton School of Business.
Anand holds over 11 years of experience investing in emerging markets across Asia and Africa. He has invested in sectors across infrastructure, telecoms, manufacturing, logistics and healthcare. He is currently responsible for the Industrial Businesses equity investments team covering manufacturing, real estate and logistics across South Asia and Africa. Prior to joining CDC, Anand worked with IDFC Private Equity in Mumbai where he was part of a team managing around US$1.3bn focused on growth capital investments in infrastructure in India. Anand started his career with Ernst & Young’s corporate finance team in India. He is a CFA charter holder, holds an MBA from the Indian Institute of Management and a Bachelors degree in Electronics and Communication Engineering from the University of Delhi.
Makarov holds over 15 years of experience in the financial markets in general and emerging markets in particular. He is responsible for launch of African practice and oversight of all sub-Saharan African and South East Asian transactions at StratLink Africa. Previously, he was directly responsible for market entry of US and Commonwealth of Independent States (CIS) based companies into sub-Saharan Africa and has been involved in activity focusing on emerging economies in Africa and South East Asia. He holds a Master of Science in Risk Management from Stern School of Business, New York University and Amsterdam Institute of Finance and a Bachelor of Science in Marketing from University of Massachusetts, Amherst.
Maonga, a Certified Public Secretary who is a Member and Fellow of the Institute of Certified Public Secretaries of Kenya, has over 30 years of experience in Company Secretarial and Registration Services.