East African Portland Cement Company (EAPCC) plans to spend Sh2.5 billion in new investments this year, a move that will see the loss-making firm take new debts or raise funds from shareholders.
The firm announced the major capital expenditure at a time when it has negative cash flows, a pointer that it is likely to borrow from banks or rollout a rights issue.
The company declined to comment when contacted for this story. It remains to be seen how the cement producer will finance the planned projects.
EAPCC plans to install a new cement mill feeding system, electrostatic precipitators used for gas cleaning and a Sh350 million packaging line to reduce the waiting time for customers at its cement plant.
“Despite intentions by the company to scale up production, we remain concerned about the industry’s competitive nature which will need firms to focus more on cost containment and efficiency in order to combat the stagnant cement prices,” Standard Investment Bank said in a statement.
EAPCC posted a Sh386.6 million net loss for the year ended June compared to a net profit of Sh1.7 billion the year before.
The Athi River-based company said sales remained flat at Sh9.1 billion in the review period, blamed on margin pressures and reduced exports to regional markets such as Uganda and Tanzania.
Its share price Monday declined 7.8 per cent to close at Sh65 in reaction to the loss.
The performance will see shareholders go without a dividend for the third consecutive year, an outcome blamed on boardroom wrangles and increased competition that have hurt its earnings.
Shareholders missed out on the Sh0.75 per share dividend declared in June 2013 owing to the ongoing boardroom wrangles between the government and French conglomerate Lafarge.
The Capital Markets Authority suspended all resolutions passed at the firm’s stormy annual general meeting in December last year including payment of dividends, election of directors and confirmation of the cement maker’s financial accounts.