Loss-making East African Portland Cement Plc (EAPCC) #ticker:PORT plans to spend Sh425.87 million to evict squatters who occupy about a third of its vast 6,695 acres in Kikambala, Kilifi.
The asset-rich firm has for decades been in dispute with squatters whom it claims have illegally occupied its land.
“Management has used significant judgement and assumptions in determining the appropriateness of classification of the encroached land as investment property and in arriving at the cost of evicting squatters,” the cement maker says in latest filings to shareholders.
“Given the subjective nature of the estimates it is possible that outcomes that are different from the assumption could require a material adjustment to the carrying amount of the asset.”
EAPCC’s 6,695 acres, spread on five pieces, are valued at an estimated Sh25.27 billion, according to its latest annual report for the year ending June 2021.
More than 2,200 acres are however occupied by squatters, but the state-run company says it is determined to repossess it.
Kenya’s oldest cement manufacturer, founded in 1933, now estimates the value of the land occupied by the squatters at about Sh8.34 billion, based on open market valuation as determined by Ark Consultants Limited and Knight Frank Valuers.
The litigation estimates, EAPCC says, take into consideration the assumed period it will take to evict the squatters, security resources required and their expenses as well as legal costs.
“Despite the encroachment, the directors believe that the land occupied by squatters has an economic value to the Group based on the disposal done during the year, the offers already received for it and a commitment from the Government to facilitate eviction as necessary,” EAPCC says in the report.
“It is therefore appropriate to continue classifying the land as investment property.”
The debt-ridden firm has returned to profitability after posting Sh1.8 billion in net earnings for the year ended June from Sh2.7 billion loss a year earlier, helped by gains in its land holdings and a larger tax credit.
EAPCC booked a fair value gain of Sh5.7 billion in its investment property in the review period, up from a Sh1.1 billion gain a year earlier.