Portland in mega land sale to stop KCB Sh5.4bn debt auction

The board of the troubled East African Portland Cement Company (EAPCC) is seeking shareholder approval to sell 2,000 acres of prime but idle land in Mavoko, Machakos County to save the firm from being auctioned by KCB Group over a Sh5.4 billion loan.

The bank had given the loss-making cement firm a 40-day ultimatum to clear the debt or have its assets auctioned any time from Wednesday.

Portland manufactures the Blue Triangle brand of cement.

Now, the company has called an extraordinary general meeting (EGM) on September 27 to vote on the sale of two parcels of land amounting to 2,000 acres.

The sale will be done in partnership with KCB Group.

EAPCC will also surrender of another 4,256 acres for free to the government for construction of affordable homes under the Big 4 Agenda.

The firm has struggled to grow sales in the face of growing competition and an ageing plant, making it difficult for it to meet its obligations, including loan repayments.

“The bank on 26th July, 2009 issued a 40 days statutory notice to sell company assets unless the total debt is settled,” EAPCC said in the notice announcing the EGM.

“Shareholders are requested to consider, and if deemed fit, approve the disposal of land parcels LR8786 (745 acres) and LR 8784/4 (1,329.95 acres) to raise funds to clear all loan obligations and raise funds for working capital needs as well as funding of operational and plant refurbishment requirement.”

Clear KCB loan

Portland reckons the sale will generate more than the Sh5.4 billion needed to clear the KCB loan.

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

“The clearance of the KCB debt will save the company from incurring finance costs currently at Sh614 million per annum,” said EAPCC.

Portland made a net loss of Sh1.26 billion in the six months to December, compared to a loss of Sh966 million in the same 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 from about 30 percent a decade ago.

The firm will cede 4,256 acres to the government for free because it has failed to use it for agricultural use in line with allocation terms inked in 1960.

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

Idle land

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

“It is expected that the utilisation of the land for construction of affordable homes and resultant infrastructure will lead to an appreciation in the value of the company’s adjacent parcels,” EAPCC says in the pitch to shareholders.

Portland is 52 percent owned by the government, LafargeHolcim (41.7 percent), National Social Security Fund (27 percent) while other shareholders at the Nairobi Securities Exchange have six percent holding.

The Cabinet approved the EAPCC land transactions on August 1.

Last year, EAPCC sold 900 acres at Sh5.2 billion to Kenya Railway Corporation (KRC) for construction of an inland port currently under way.

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.

Redundant

The asset sales plan come barely a month after the company issued a notice to declare all workers redundant to reduce human capital to 600 workers.

Employees are to be subjected to contract terms of employment with a 40 percent pay cut. The first batch of affected employees is expected to leave the company this month.

The company’s current liabilities exceeded current assets by Sh6 billion as 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.