Portland Cement sacks all managers in cost cutting plan

East African Portland Cement Company (EAPCC) has fired all of its top managers amid a restructuring plan that will see the loss-making firm sell 2,000 acres of prime but idle land in Mavoko, Machakos, to boost its finances.

The firm last week issued the 136 supervisors and managers with dismissal notices, although it has also revealed plans to rehire some of them on 40 percent of their previous pay.

Junior staff will be dismissed later once the EAPCC sells two parcels of land amounting to 2,000 acres in the firm’s quest to cut workforce by a quarter from the current 800 employees.

EAPCC acting Managing Director Stephen Nthei has said that a new and leaner management team will be in place by October 19 when the dismissed workers are set to exit.

“All senior officers, including heads of departments and supervisors apart from the managing director, are the subject of the redundancy notice,” Mr Nthei said in a phone interview with the Business Daily.

“However those affected have a window of 30 days to reapply for their positions while serving under the notice.”

EAPCC is seeking to declare its entire 800 employees redundant before asking them to reapply under new terms, with the aim of trimming its bloated wage bill.

First priority

“We will give the affected workers first priority to re-apply for their positions under new terms," said Mr Nthei.

“We have a workforce whose total cost compared with productivity is very high.” No firm has taken a similar action of letting all staff go in the recent past.

Portland made a net loss of Sh1.26 billion in the six months to December, compared to a loss of Sh966 million in similar period a year earlier.

Its sales nearly halved from Sh9 billion in the year ended June 2014 to Sh5 billion in 2018 in a period that has seen rivals eat into the firm’s market share, which currently stands at 11 percent, down from about 30 percent a decade ago.

EAPCC staff costs stood at Sh4 billion last year, meaning that employee expenses consumed 80 percent of sales.

The company’s current liabilities exceeded current assets by Sh6 billion as at June 30, 2018. It has not released figures for the current fiscal year.

Portland’s rivals include Bamburi Cement and National Cement Company, which in May signed a deal to buy ARM Cement after it was put under administration last August by creditors over debts totalling Sh20 billion.

Portland, which manufactures the Blue Triangle brand of cement, will on Friday seek shareholder approval to sell 2,000 acres of its Mavoko land to save the firm from being auctioned by the KCB Group over a Sh5.4 billion loan.

Clear debt

It anticipates that the sale will generate more than the Sh5.4 billion needed to clear the debt.

The extra money will be used for operations, including meeting the redundancy cost and upgrading its ageing plant. KCB Group will shepherd the sale process.

The cement maker will also cede 4,256 acres to the government for free because it has failed to put the property under agricultural use in line with the allocation terms inked in 1960.

Portland has informed shareholders that the State has agreed to evict squatters from the property under the land purchase deal.

The cement firm’s idle land spans more than 12,000 acres, but thousands of squatters are currently occupying a significant part of the property.

The company is also eyeing to refurbish the current dilapidated plant and put up a fully integrated cement milling line at a cost of Sh28 billion. The new production line will be built in phases.

Portland is 25.3 percent owned by the government, LafargeHolcim (41.7 percent), National Social Security Fund (27 percent) while other shareholders at the Nairobi Securities Exchange-listed manufacturer have six percent holding.