ARM Cement FY15 Loss and the Deleveraging Exercise

Earnings Release

ARM Cement, formerly Athi River Mining Ltd., is a Kenya-based cement manufacturer company. It also manufactures sodium silicate, lime, industrial minerals, formulated fertilizers and special building products in east and southern Africa. The Company has subsidiaries operating in Kenya, Tanzania, South Africa and Rwanda. The Company is also engaged in mining and processing of industrial minerals and chemicals, trading in other building products and the sale of fertilizers.

ARM Cement released its full year results for the period ending 31st December 2015. ARM Cement gave a profit warning on their 2015 results thus a diligent investor should have expected lower earnings. Question is how low were the earnings? Well, we highlight briefly their results below:

  • Revenue grew by 7% to KES 14.73Billion vs KES 13.74Billion in 2014
  • A loss before tax of KES 3.54 Billion was made in 2015 compared to a profit of KES 2.02 Billion made in 2014.
  • A loss after tax of KES 2.89Billion was made vs a net profit of KES 1.49Billion in 2014.
  • No dividend was recommended
  • One of the main reason the company recorded losses was due to an unrealized exchange loss of KES 3.7Bn from the company’s US $ denominated borrowings this was due to the depreciation of the Kenyan and Tanzanian currency.

ARM Cement is set to receive $140Mn of an equity investment from UK’s CDC Group pending shareholders and regulatory approval. The investment would be used to settle some of the cement maker’s debt. ARM cement would use $110 million to retire debt while the rest would go into capital expenditure.

That’s right $110 Million. In short CDC Group is letting go 78.6% of their investment to debt repayment. ARM Cement for sure needs to reduce their leveraging which has historically been at the highest levels of any company listed in the NSE, in fact the average total debt/equity between 2004 and 2014 has been 166%. This investment might be a great step in deleveraging their position going forward.

ARM Financials.JPG

Source: (ARM Cement, Kenyan Wall Street)