ARM Cement made a net loss of Sh6.5 billion last year, but the projection is that this figure will be surpassed in the current financial year, eroding the company’s asset base and worsening its debt load.
PwC’s forecast, which did not give an estimate of the anticipated loss, is based on the analysis of the firm's performance in the eight months ended August.
Collapsed cement maker ARM is set to surpass last year’s record loss in the current full year ending December as inadequate working capital continues to hamper production, the company’s administrators PricewaterhouseCoopers (PwC) have warned.
The Nairobi Securities Exchange-listed firm made a net loss of Sh6.5 billion last year, but the projection is that this figure will be surpassed in the current financial year, eroding the company’s asset base and worsening its debt load.
PwC’s forecast, which did not give an estimate of the anticipated loss, is based on the analysis of the firm's performance in the eight months ended August.
“Barring a dramatic improvement in the last four months of 2018, it appears that the performance will be even worse as the year to date performance vs the same period in 2017 indicates,” the consultancy firm says in a report on ARM’s affairs.
“Again, this decrease is driven by comparatively poor production and sale of cement and clinker in this period.”
The company is expected to close the year with Sh3.2 billion sales, a 62 per cent drop from Sh8.6 billion recorded in 2017. The administrators say that ARM could return to profitability in 2020 assuming, among other factors, that adequate working capital is secured to boost production.
The cement maker needs some Sh1.9 billion in working capital including Sh405 million for buying spares to undertake emergency repairs at its Kenyan and Tanzanian plants next year.
PwC has said that it is seeking a short term bridge loan from ARM’s existing secured lenders and other parties to maintain cement production.
The administrators say keeping production rolling is important in maximising value for creditors in whichever combination of options is used to resolve its debt pile including selling assets and getting a new strategic investor.
“The administrators consider that pursuing such a transaction while operations are ongoing would be likely to achieve a better outcome than shutting the plants and undertaking an asset sale,” reads part of the report.
“As a consequence, the Administrators have taken the view that continued trading is, in the interim, in the best interest of the company and its creditors.”
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