Portland seeks Cabinet nod to sell Sh10bn land

The East African Portland Cement Company (EAPCC) is waiting for Cabinet approval to sell Sh10 billion land as part of efforts to return to profitability.

The Nairobi bourse listed firm, through the Ministry of Trade, has prepared a brief for Cabinet approval to sell part of 13,000 acres of land it owns in Athi River.

Proceeds from the sale will be used to retire a Sh3.8 billion loan and revamp its ageing plant that requires nearly Sh45 billion to be brought to a level where the EAPCC can compete well with nimble rivals like Savanna Cement.

Some of its land, especially along the standard gauge railway, has been grabbed by gangs of speculators with possible political backing.

“The board is in the process of raising Sh10 billion to address the most urgent issues, top of which is the reduction of bank loans that are sapping cash flow,” said EAPCC chief executive Kephar Tande. The balance will be used to revamp the plant.

The EAPCC plant, which is nearly half a century old, is prone to shutdowns and expensive maintenance costs have seen it lose market share for non-production and higher unit cost in a business environment beset by cutthroat competition.

Mr Tande, who is retiring in November, reckons that the plant has played a big role in the losses the firm has posted recently.

READ: End of Tande’s era as Portland kicks off search for CEO

The EAPCC expects its profit to slide by more than a quarter in the financial year ending June 30 citing year-earlier gains on land sales.

“The plant is aged and a number of critical elements are obsolete. Some of the cement mills are over 50 years old,” said Mr Tande.

“The problem of the plant is exemplified by the fact that the performance in the current financial year continued to suffer despite the board appointing a Lafarge representative to support the plant through technical assistance and employment of chief operation officer. The deep-rooted issues need more time and resources,” he added.

Albert Sigei, a Lafarge executive, joined the EAPCC in August 2015 to help steer it back to profitability, but the firm sunk deeper into losses.

The EAPCC reported a net loss of Sh531 million for the half-year ended December 2015 compared to an after-tax loss of Sh65.3 million a year earlier.

Mr Sigei, who quit in April, was tipped to replace Mr Tande who opted not seek another term. Lafarge owns 41.7 per cent of EAPCC, Treasury (25 per cent) and NSSF (27 per cent).

Mr Tande reckons that new CEO will require Sh45 billion to steady the plant through a combination of asset sales and shareholder cash injection.

This comes as rival firms invest billions of shillings to capture expected rise in cement demand, fuelled by a burgeoning middle class with higher disposable incomes, as well as government-fuelled infrastructure expansion across the country.