Portland Cement shares fall 22pc on insolvency news

Shares of the troubled East African Portland Cement Company have tumbled by more than a fifth in the last one week on news that the loss-making firm is insolvent.

The Athi River-based cement-maker closed Monday’s trading at Sh21 per share having opened last week at Sh27 apiece, the day the Business Daily broke news of Portland Cement’s troubles.

Portland Cement’s poor run at the Nairobi bourse comes at a time the company is battling declining earnings, bankruptcy, accounting fraud, and corporate governance queries.

EAPCC shareholders have seen the value of the stock tumble 55.1 per cent since the beginning of this year, wiping out half of the share’s value and ranking the cement maker among the worst performers at NSE.

Rival Bamburi has shed 9.1 per cent year-to-date and ARM Cement has lost more than a third or 37 per cent in the period.

“Operational efficiency continues to lag most of its competitors pointing to persistent weaker margins in a price-sensitive oversupplied market,” Standard Investment Bank said in a research note.

“In addition, perennial change in top management remains a key challenge when it comes to strategy formulation and execution.” Furthermore, Portland shareholders are now experiencing a dividend drought for the fifth consecutive year. The company last paid a dividend of Sh0.50 in the period to June 2011. Portland’s operating loss nearly doubled to Sh1.58 billion in the year to June 2016 amid a soaring wage bill that has forced the company to cut 1,000 jobs, two-thirds of its workforce.

The firm’s liabilities, at Sh4.96 billion, have grossly exceeded its Sh2.1 billion assets base, rendering Portland Cement insolvent.

READ: Portland Cement audit now finds Sh3bn insolvency

The company has hired Ernst & Young (EY) to carry out a forensic audit on inventory losses estimated at Sh900 million linked to staff theft and alleged cooking of books.

EY is currently conducting a forensic audit at Portland in an effort to seal operational gaps that may have been exploited by unscrupulous employees to enrich themselves.

Top shareholders and directors have frequently engaged in fights seeking to control operations at the cement firm, which holds 14,000 acres of prime real estate.

The Treasury owns 25 per cent of Portland and has traditionally teamed up with NSSF’s 27 per cent to control the firm where rival LafargeHolcim owns a 41.7 per cent stake.

Simon Peter ole Nkeri took over as Portland boss in August to succeed Kephar Tande who had been at the helm for six years.

Albert Sigei, a Lafarge executive tipped to succeed Mr Tande, quit in May under unclear circumstances in a move that jolted the French firm’s plan to take over leadership at Portland.