East Africa Portland Cement Company (EAPCC) says it has completed the settlement of KCB’s Sh6.8 billion loan via land transfers to the lender, cutting its finance costs by Sh735 million in the year ended June.
The cement maker has been looking to dispose of some of its extensive land holdings in Athi River to fund a restructuring of its balance sheet --mainly to pay debt and bridge a working capital deficit.
The company had disclosed in February when announcing its half-year results that it was at the tail end of terminating the Sh6.8 billion bank loan. It had also been able to negotiate a cessation of interest payments in light of its progress made in settling the dues.
The debt was initially in form of a number of facilities meant to cover working capital. But after a breach of covenants, the lender recalled the debt and subsequently entered into a settlement deed with EAPCC in 2019 where the facilities were consolidated into one term loan.
EAPCC shareholders then resolved to dispose of investment property to retire the KCB debt, and by June 2021 had transferred land to the lender which yielded a reduction of Sh4.85 billion on the loan. The balance has now been cleared through a further transfer of land to the lender.
“Administration and selling expenses decreased by 54 percent (Sh1.3 billion) resulting from reduction in loss from disposal of land (KCB debt settlement) and reduced litigation cost amongst others underscoring the impact of cost containment measures embarked on in the year under review,” said the company in a commentary on the full year financials.
“The cost containment initiatives, reduction in finance cost (Sh735 million) following settlement of the KCB loan…will position the business for a period of take-off as it embarks on the implementation of its five-year strategic plan.”
Despite the settlement of the KCB loan balance, the company’s total liabilities went up by Sh640 million in the period to Sh14.27 billion, attributed by the company to a buildup in staff obligations (gratuity and other trade payables).
Other than settling the KCB loan through land transfers, EAPCC is also looking to sell an additional 709 acres in Athi River to dozens of squatters who live on the land to raise working capital.
A plot measuring 40 by 80 feet will be sold at Sh600,000, meaning that the company can raise up to Sh5 billion should it sell the entire piece, although this is likely to be lower due to provisions for infrastructure such as access roads.
The squatters settled on the land in 2010 after the company advertised its intention to sell up after exhausting limestone deposits.
The company resumed full clinker production last month after spending Sh500 million on upgrades on the kilns at its Athi River factory, whose frequent breakdowns had affected the supply of its products in the market.