The loss-making firm is currently undergoing restructuring including hiving off its non-core business,
This means there’s less certainty about the future especially in regard to search for a strategic investor.
However, GCR affirmed the national scale debt ratings for the cement maker at long term BB (KE) and B (KE) short term respectively.
South Africa-based Global Credit Ratings (GCR) has placed ARM Cement #ticker:ARM on a “rating watch” until July, marking the second time it has done so in the past six months.
The loss-making firm is currently undergoing restructuring including hiving off its non-core business, meaning there’s less certainty about the future especially in regard to search for a strategic investor.
However, GCR affirmed the national scale debt ratings for the cement maker at long term BB (KE) and B (KE) short term respectively.
It also confirmed the cement manufacturer’s commercial paper rating at B (KE).
In July 2017, the agency had placed the firm on a rating watch after downgrading it from A (KE) for long term and A1 (KE) for short term and A1 (KE) for commercial paper, with a stable outlook, citing liquidity pressure and funding constraints.
“In recent engagements with GCR, ARM’s management indicated that plans to both introduce a new strategic investor and to restructure debt group are advancing as per expectations.
Nevertheless, no timeline for the conclusion of negotiations has been provided,” the agency said on Thursday.
Last year’s downgrade was largely due to the operating losses sustained in the Tanzanian cement market and the decrease in cement demand in Kenya ahead of the 2017 presidential elections.
The firm made a substantial Sh1.4 billion operating loss in the first half of 2017, whilst debt remained high at around Sh13 billion ($ 130 million).
The agency noted that the sale of non-cement business has received approval from the necessary regulatory authorities, as well as ARM shareholders and will likely be finalised by mid-this month.
ARM is expected to receive Sh1.6 billion ($16 million) from the sale, which will be directed to settling a portion of the outstanding debt.
The firm has indicated it will likely take six months or more until funds are received from the larger refinancing initiatives.
In the meanwhile the management said it is focused on returning operations to profitability.
Cement prices in Tanzania are reported to have increased and the clinker plant is able to operate at higher capacity, due to rising clinker sales to other cement companies and more stable coal supply.
In Kenya, demand has reportedly begun to recover following the resolution of the presidential election, thus delayed infrastructure projects are expected to gain momentum.
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