Long-serving ARM Cement #ticker:ARM chief executive Pradeep Paunrana has been ousted in a management shake-up of the troubled company orchestrated by UK sovereign wealth fund CDC Group.
CDC, which owns a 42 per cent stake in the troubled Nairobi Securities Exchange (NSE)-listed #ticker:NSE cement maker, has also made other key boardroom changes that will see businessman Linus Gitahi take over as chairman.
The management and board changes are seen as CDC’s bid to have a tighter grip on ARM’s operations that have remained in control of the Paunrana family, which founded the manufacturer.
The company has in recent months announced changes in its executive suite, further isolating the Paunranas who still hold significant shares in the business.
Company secretary John Maonga in a regulatory filing disclosed Mr Paunrana’s impending exit, setting the stage for a new-look ARM.
“The board has identified a new CEO and is at an advanced negotiation to finalise the contract of employment,” said ARM in the regulatory filing.
“Once appointed, the new CEO will join the board and announcement to that effect will be communicated accordingly.”
In the Monday changes, ARM board tapped Mr Gitahi, a former Nation Media Group CEO, #ticker:NMG as ARM’s board chairman.
Mr Gitahi replaced long-serving director Wilfred Murungi, bringing to an end the latter’s 24-year tenure as an ARM director.
ARM deputy managing director Surendra Bhatia is also set to retire from his position at the cement manufacturer, the company announced.
“Mr Linus Gitahi has joined the board as a non-executive independent director and has been appointed as the chairman of the board,” said the ARM board.
Analysts said on Tuesday the looming exit of Mr Paunrama coupled with recent radical changes at the firm illustrate that the British shareholders are moving to tighten their grip on the firm, with further widespread changes speculated to be looming for the company.
“It’s a deliberate attempt to shift the firm from a family-oriented business to a professional business,” said an insider familiar with the unfolding changes, who sought anonymity.
CDC has also tapped ex-Lafarge executive Thierry Metro as a non-executive independent director to its board.
The insider source said the incoming CEO is a professional with a long-term turnaround experience in the cement sector.
Former long-serving ARM executive director Rick Ashley, who previously held the position of chairman in the company, resigned in May this year, amid efforts by the firm to raise more funds to stabilise operations.
ARM’s former company secretary, Ramesh Vora, also resigned effective April 27 after serving for more than 24 years.
The company’s management under Paunrama has faced immense pressure in recent years to reverse major losses that have thrown the firm into an existential threat.
The cement maker’s net losses in the year ended December widened 2.3 times to Sh6.5 billion as short-term liabilities exceeded current assets by Sh13.4 billion.
Mr Paunrana said earlier the troubled firm had been looking to strengthen its management team ahead of the entry of a strategic investor.
But ARM is yet to finalise its asset sales and implement new capital raising, as well as debt restructuring which it maintains are key to turning around its operations. Yesterday, Mr Paunrama did not respond to a Business Daily query on his future in the company.
ARM had earlier announced the planned sale of its non-cement businesses, including subsidiaries involved in fertiliser and mineral production.
The cement manufacturer’s sales declined 32 per cent to Sh8.6 billion in the review period amid vicious price wars in the Tanzanian market where prices fell 30 per cent.
The company’s deepening losses have eaten into its shareholder funds, which dropped by Sh7 billion to Sh20.7 billion.
Last month, ARM auditors said the firm has been misrepresenting its financial statements to conceal stale subsidiary debts amounting to Sh21 billion.
The company’s share price has fallen steadily from a high of Sh90 in 2014, with the stock closing at Sh4.75 on Tuesday, 7.95 per cent up from Monday’s share price of Sh4.40.
Mr Paunrana’s pay rose by Sh20 million to Sh114.7 million in the year ended December 2017, even as his company fell deeper into financial trouble.
The Sh6.5 billion net loss and a major share price erosion have hit long-term investors hard.