Portland, KCB eye Sh10bn land buyer

Loss-making East African Portland Cement Company (EAPCC) has stepped up the search for a buyer to snap-up part of its vast parcel of land for at least Sh10 billion to help it clear mounting debts owed to KCB Bank and suppliers, and unlock fresh funding to keep it afloat.

The cash-strapped firm said it is yet to find a “suitable” buyer for 2,076 acres, which shareholders voted to sell at an extraordinary general meeting in September 2019 to rescue it from insolvency after years of mismanagement amid a slowdown in property markets.

Acting managing director Stephen Nthei said the State-run cement maker and KCB are actively involved in the process of identifying a buyer for the land in Mavoko, Machakos County, after delays partly attributable to Covid hardships.

“We are at the stage of identifying a buyer and we have discussed with the lender because we are both in it as beneficiaries since EAPCC is in search of working capital while KCB is keen on having their accounts serviced,” Mr Nthei, who took charge in June 2019, said in an interview.

“Both institutions are in pursuit of identifying a suitable buyer who’s able to raise the required funding subject to prevailing valuation, but on basis of last valuation we are looking at anything above Sh10 billion.”

At a cost of Sh10 billion, EAPCC will dispose of the targeted land — part of about 12,000 acres it holds — at an estimated price of Sh4.8 million per acre.

This is a discount of about 184 percent compared with average Sh13.7 million cost per acre in neighbouring Athi River area, according to latest estimates by HassConsult which tracks land prices as advertised.

Poor financial performance at the Kenya’s oldest cement manufacturer, founded in 1933, has seen it default on the loan at KCB for the past three years as well as struggle to pay suppliers and remit statutory deductions such as payroll taxes.

EAPCC has, as a result, sunk into negative equity estimated at Sh13.82 billion in the year ended June 2020 from Sh10.2 billion the year before and Sh6.14 billion end of June 2018.

The widening insolvency is largely on account of conversion of the initial Sh3.3 billion from long- to short-term loan by KCB after the cement maker defaulted. The outstanding loan has since ballooned to Sh6 billion from Sh5.4 billion at the time the shareholders sanctioned the land sale because of rising interest and penalties.

The sale of land is the only option to defray the widening indebtedness with KCB having attached a debenture on the titles since 1978, making it difficult for other lenders to come on board. “The main objective is to clear (the loan) and discuss with KCB on other methods of support. That will open up other ways of financing the business,” Mr Nthei said.