ARM halts Kitui plant plans to sort out debts, shape up Tanzania unit
ARM chief executive Pradeep Paunrana. PHOTO | FILE
Athi River Mining (ARM) has postponed plans to build a new plant in Kitui until it sorts out its debts and shapes up its Tanzanian operations.
The firm told analysts at Exotix it would build the plant in Kitui County after it has streamlined operations in Tanzania and paid off some of the company’s dollar-denominated debt.
“We expect ARM to significantly grow their grinding capacity to five million tonnes per annum in the region by 2020. Furthermore, we understand ARM expects little pushback as it has acquired the land in Kitui and is currently seeking to relocate 400 families,” said a coverage note by Exotix.
“Management have delayed the Kitui project as the key focus will be on consolidating their current operations (specifically the Tanzanian operations), growing EBITDA margins to 29 per cent at the group level by 2016/17 and paying-down existing debt,”
The listed cement maker first announced plans of setting up the plant in late 2013 with chief executive Pradeep Paunrana saying work on the new facility would begin a year later.
The coverage note said ARM would begin the first phase of its capital expenditure programme in 2017 under which it would spend $150 million (Sh15 billion) on the construction of a grinding and clinker plant.
The second and final phase will see another $100 million (Sh10 billion) spent on capex. All work is expected to be completed by 2020.
The listed firm plans to issue a $75 million (Sh7.5 billion) five-year bond that will go towards paying part of its $230 million (Sh23 billion) debt. ARM will also seek a $75 million (Sh7.5 billion) loan from local banks.
ARM sank into a loss of Sh469 million in third quarter mainly due to the strong dollar, down from a Sh1.1 billion profit generated over a similar period in 2014. ARM incurred foreign exchange losses of Sh2 billion.
Revenues, however, increased to Sh11.7 billion from Sh10.9 billion, or 10 per cent and the firm said going forward focus would be on managing costs.
“The company expects to continue improving performance for the remainder of the year through costs efficiencies arising from increased production of clinker from the Tanga plant (Tanzania), and increased sales from all business divisions,” said ARM when releasing its third quarter results.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
