ARM Cement bets on Tanga clinker cut costs and grow profits

Listed cement maker ARM Cement is betting on clinker produced at its Tanga plant to significantly cut costs and prop up its margins.

The firm started producing the clinker, a major component in cement that is derived from limestone, last year.

“The availability of clinker from Tanga is likely to improve margins and profitability of Kenyan operations… we continue to be a cost-effective clinker manufacturer across the region,” ARM chief executive Pradeep Paunrana said.

The company is trying to reposition its debt-financed growth that eroded earnings due to currency fluctuations in its East Africa regional operations.

ARM’s financing costs shot up to Sh1.8 billion and the foreign-denominated debt pushed its forex losses to Sh3.7 billion.

South Africa rating firm GCR recently noted that clinker sufficiency makes ARM one of the lowest cost producers in the region, enabling it to compete aggressively in a competitive environment.

READ: ARM Cement retains strong rating after 40pc share sale

Its owners plan to cede up 40.6 per cent stake to UK development finance institution CDC for Sh14 billion, part of which will go into settling the short-term debt to restructure its balance sheet.

Mr Paunrana said the company expects to get the green light from regulators in two weeks after which it will call a meeting in July to approve the share dilution.