ARM used part of these funds to reduce its short-term loan from the Stanbic by Sh2.1 billion to Sh1.1 billion and also wired Sh1.5 billion to Lagos-based AFC, lowering its commitment to Sh4.1 billion.
ARM has in recent years found itself in a financial tight spot as high loan repayments impeded its growth and saw the NSE-listed firm slide into loss-making territory.
The balance was to go towards expanding its operations and scaling up the business’ sustainability status such as reducing energy costs.
Stanbic Bank Kenya #ticker:CFC and Africa Finance Corporation (AFC) were among the biggest beneficiaries of the Sh14.1 billion that UK’s sovereign wealth fund CDC Group injected into cement manufacturer ARM last year for a 40.6 per cent stake.
ARM used part of these funds to reduce its short-term loan from the Stanbic by Sh2.1 billion to Sh1.1 billion and also wired Sh1.5 billion to Lagos-based AFC, lowering its commitment to Sh4.1 billion.
The cement maker’s latest annual report shows it also paid Sh87.8 million to GTA Bank Kenya and a further Sh464.6 million to I&M Bank, clearing its obligations in both cases.
ARM, which was facing cash flow constraints prior to CDC’s cash injection, says it closed 2016 with a total debt load of Sh13 billion down from Sh24 billion the previous year.
It also reduced its commercial paper obligations from Sh6.5 billion to Sh734 million. “CDC’s equity investment allowed the company to start investing internally generated cash in its working capital resulting in significantly improved operational performance in the last quarter of the year,” Rick Ashley, ARM chairman, says in the report.
“The company continues to utilise internally generated cash in reducing overall indebtedness.”
ARM has in recent years found itself in a financial tight spot as high loan repayments impeded its growth and saw the NSE-listed firm slide into loss-making territory.
To free up its balance sheet, ARM initiated a capital-raising drive, seeking funds to pay off the crippling debt.
In August 2015, it announced plans to issue a Sh7 billion bond but ditched this option and instead started the search for a strategic investor, finally settling on CDC.
When announcing the deal, the cement maker said would channel about Sh11.1 billion of the fresh capital towards settling its expensive debt.
The balance was to go towards expanding its operations and scaling up the business’ sustainability status such as reducing energy costs.
“The company intends to reduce further current debt levels and has initiated a process to restructure the balance sheet with a view to reducing the short-term nature of the debt,” ARM says in the report.
