NSSF eyes more Bamburi shares to win board seat

The National Social Security Fund (NSSF) will buy more of Bamburi Cement shares to enhance its bid of re-claiming a seat in the board of the cement firm.

Bamburi’s Articles of Association guarantees a seat in its board to investor with a stake above 15 per cent — a threshold that is only met by French conglomerate Lafarge.

This made it difficult for NSSF — which a 14.7 per cent stake — to a have its representative director at Bamburi’s AGM early this month after Bamburi dropped NSSF representative Alex Kazongo from its board in March last year, citing his failure to attend successive meetings.

“We will have our seat back at next year’s AGM when the fund will have bought additional shares to meet the 15 per cent threshold,” Peter Odongo, the acting managing trustee of NSSF, told the Business Daily.

“We couldn’t buy this year because our fund managers thought it was not prudent to buy 0.3 per cent of Bamburi shares just to get a seat in the board.” 

Lafarge —which has a 58.4 per cent in Bamburi — this year strengthened its position in the cement maker’s board after it appointed two executives of the French conglomerate this month.

It brought Thomas Farrell, operations executive vice president at Lafarge, and Catherine Langreney the CEO of Lafarge Tanzania — pushing the French conglomerate’s representatives to five in the 11-member board.

Mr Odongo said that the Fund is seeing increased value from the cement maker, especially in terms of dividend payments. On Monday, it received a dividend cheque of Sh533.6 million from the cement firm compared to last year’s Sh453.6 million.

Its share has gained 14.5 per cent in the past six months to Sh158 at the close of trading yesterday and has shed 10.7 per cent over the past year.
NSSF will have to spend Sh1.7 billion to buy the additional stake (10.88 million shares) based on yesterday’s trading price.

Getting cash for purchase of shares is not likely to be a problem given that it is expected to generate a surplus of  Sh10.6 billion in the year to June 2013 compared to a deficit of Sh2.6 billion in the year ending this Friday, according to figures presented to Parliament by Finance minister Njeru Githae last month.

The fund has indicated it will sell some of its shares and real estate assets, which is necessary to keep it in the good books of the Retirement Benefits Authority (RBA). Its share of property is estimated at 39 per cent (Sh38 billion), which is in breach of statutory requirement of 30 per cent.

NSSF plans to sell two commercial buildings in Nairobi’s Central Business District — Hazina and View Park Towers — and a parking lot in Upper Hill to bring the fund into compliance with the RBA guidelines. This is expected to generate about Sh2.5 billion to the fund and the government has committed to buy the twin buildings.

The National Social Security Fund’s investments held in land and buildings, as a proportion of its entire portfolio, rose from 34 per cent to 39 per cent in the second half of last year against a statutory requirement of 30 per cent.

“We are actively restructuring our investment portfolio to enable us realise maximum returns and also comply with regulatory requirements,” said Mr Odongo.

The Fund’s stakes in firms listed on the Nairobi bourse like KCB Group, EABL and Barclays Bank is estimated at about Sh35 billion. 

New entrants

The quest by the Fund to acquire more shares in Bamburi is a departure from its position last year when it said it will reduce its holding in the cement firm on increased competition in Kenya’s cement sector.

At the time, Bamburi’s sales had dropped from Sh29.4 billion to Sh28 billion in the year ended December 2010, leading to a 24.6 per cent drop in profits.

Researchers at African Alliance Investment Bank said that the two biggest cement makers, Bamburi and East African Portland, had lost significant market shares to new entrants National Cement, makers of Simba brand, and Mombasa Cement who supply the Nyumba brand. It has in the recent past reduced its stake in the company from 21 per cent in 2008 to 14 per cent.

But Bamburi appears to have shrugged off the emerging competition to post a net profit increased 11.5 per cent to Sh5.8 billion.

pmutegi@ke.nationmedia.com