Companies

ARM to list its non-cement business separately by 2016

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An employee of ARM Cement company feeds bags into the plant at Athi River. The firm is preparing to spin off and list non-cement business at the Nairobi bourse within three years. Photo/File

ARM Cement has announced a 28 per cent rise in half-year profits as the firm prepares to spin off and list non-cement business at the Nairobi bourse within three years.

The cement maker said its net profit stood at Sh702 million in the six months to June compared to Sh550 million in the same period last year, helped by a rise in cement sales. It forecast a strong performance for the second half of the year.

“We are very hopeful that in two to three years, we will have listed the new non-cement business and market it as an independent brand in the region,” said Pradeep Paunrana, the managing director adding that the firm was laying grounds for the separation.

Earlier, ARM said it was holding talks with private equity companies on providing $20-$25 million for a 30 to 50 per cent stake in the fertiliser subsidiary, which would then be listed at the Nairobi Securities Exchange.

The proceeds from the sale were to be used to build a new fertiliser plant with a strategic investor.

ALSO READ: ARM to spin off non cement arm as profit rises 328pc

“The businesses are intricately related and dependent, therefore, it would not be in the benefit of the company to have independent management,” said ARM.

The cement and lime business accounted for 82 per cent of ARM sales last year, with the fertiliser and industrial minerals division taking the remaining share.

Focus on cement business is informed by lucrative opportunities presented through growing demand across East Africa as the region raises spending on infrastructure. This helped increase sales of ARM 28 per cent to Sh6.49 billion in the six months to June.

The firm commissioned a new cement plant with an annual capacity of 750,000metric tonnes in Dar es Salaam to cut reliance on the Kenyan market.

The new plant accounted for 8.7 per cent of ARM sales last year. It also has operations in South Africa and Rwanda.

Last year, it received a $50-million (Sh4.2 billion) loan from Africa Finance Corporation (AFC) to rump up production. AFC will own an equivalent of 13.6 per cent of ARM in the event it exercises the right to convert the debt to equity.

Cement companies are a focus for investors seeking a slice of East Africa’s strong economic growth.