Kenblest seeks Sh1 billion IFC loan to fund expansion
Kenblest Group directors Mayur Shah (left), Anju Shah and Jinit Shah at the Thika factory. PHOTO | FILE
What you need to know:
Kenblest, a 33-year-old family-owned business, began upgrading and expanding its three constituent businesses in April and is expected to complete the project by December.
The firm is increasing its daily baking capacity from the current 300,000 to 400,000 loaves of bread, a move that will see it cement its position as Kenya’s leading bread maker.
Kenblest currently employs a total of 730 people and the expansion project is expected to increase this number by 80.
Bread maker Kenblest Group is negotiating a Sh1 billion loan with the International Finance Corporation (IFC) to partly finance the Sh2.2 billion expansion of its milling business in Thika.
The IFC, which is the World Bank’s private financing arm, says in its disclosure of the deal that it is considering advancing the loan to the Thika-based company, signalling that the negotiations have entered a critical stage.
“IFC is considering investing a loan of up to $10 million to finance the $22 million project of Kenblest Limited, McNeel Limited, and Sonicare Limited, a Kenyan food processing group,” the financier says in its website.
Kenblest, a 33-year-old family-owned business, began upgrading and expanding its three constituent businesses — a bakery, wheat and maize milling factories — in April and is expected to complete the project by December.
The bread maker had initially entered into an agreement with KCB for the Sh1 billion credit line but says it has since decided to secure the funds from IFC due to the high interest rates regime in Kenya.
“We had a round-table meeting with representatives of KCB and IFC and decided to restructure the loan for the benefit of everybody,” said Kenblest Group chief operating officer Neel Shah in an interview.
“Interest rates in Kenya are quite high and that is why we decided to get the loan elsewhere to reduce our finance costs. The remainder of the money will come from KCB and internally generated funds.”
KCB had already lent Kenblest Sh180 million to buy a new fleet of vehicles, but their overall contribution to the loan facility has now been scaled downwards.
Kenblest is increasing its daily baking capacity from the current 300,000 to 400,000 loaves of bread, a move that will see it cement its position as Kenya’s leading bread maker.
The firm’s bread brands are Kenblest White Bread and Kenblest Brown Bread, packaged in sizes ranging between 200 and 800 grams. Three weeks ago, Kenblest launched Tunda, a bread made from soya flour and milled papaya and coconut targeting health conscious consumers.
McNeel Millers, Kenblest’s wheat-milling subsidiary, is doubling its installed capacity from 150 tonnes per day while also building storage silos capable of holding 32,000 tonnes of raw material.
The company, which supplies the bakery with flour and also manufactures wheat flour under the brand name Two Ten, has silos with a holding capacity of 4,000 tonnes.
About 70 per cent of wheat milled by McNeel is imported via commodity dealers and originates mostly from Canada, USA and Russia.
Kifaru Industries Limited, a maize milling business whose products also trade under the name Two Ten, will see its installed daily capacity more than double to 150 tonnes from the current 60 tonnes.
The company, which also bottles water under the brand name Acacia, sources all its maize locally.
“The Shah family (Anju Shah, Jinit Shah, Mayur Shah and their family) owns 100 per cent of Kenblest Limited and has been conducting business in Thika for three generations since the 1930s,” IFC says in its disclosure documents, adding that Kenblest is undertaking the upgrade with input from specialist engineering companies as appropriate.
Kenblest currently employs a total of 730 people and the expansion project is expected to increase this number by 80.
The expansion puts Kenblest enroute to significantly boosting its capacity, allowing it to take on its main rival, Broadways, which is in the process of doubling its capacity from the current 240,000 loaves per day.
Broadways, a family-owned business that started 57 years ago, recently announced that it is using Sh1 billion to expand its milling plant with half of that amount being a loan from Barclays Bank.
The bakery employs 500 people and the project will increase this to 700. The new facility is set to open next year.
Broadways’ bread brands include New Seneta, Broadways Premium, Sandwich Bread, Broadways Sliced White Sandwich Bread and Broadways Sandwich Bread.
Competition in the bread sector has become stiff after the recent emergence of small bakeries that are focused on cutting prices to attract customers to their brands. Larger factories should, therefore, give Broadways and Kenblest the economies of scale needed to keep these new competitors at bay.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
