ARM Cement released its FY17 earnings posting a staggering Ksh 6.5 Billion loss compared to a loss of Ksh 2.8 Billion in the previous financial year. Additionally, the group recorded a 32.2 per cent drop in revenue to Ksh 8.7Bn as it cited business challenges both in the Kenyan and Tanzanian market.
According Apex Capital, liquidity challenges continue to persist as ARM Cement’s current ratio stands at 0.2; falling from 0.6 in FY16 attributed to rising current liabilities coupled with falling current assets.
CDC Group, the UK’s development finance institution recently announced that it would bring in changes into the ARM board replacing Ketso Gordhan and Pepe Meijer with Sophia Bianchi and Rohit Anand. The British firm had in April 2016 bought a 42 per cent stake in ARM for Ksh14 billion when the company’s shares were trading at Ksh 40.
However, things have gone south since then and the stake is now valued at Sh 1.006 Billion given that CDC was allocated 353 Million shares at the time. The company’s shares closed at Sh 2.85 on Monday.
The firm is set to complete the exit from its non-cement business during the course of the year which may see it finance its operations. In addition, the group plans to replace its expensive short-term debt with cheaper long-term debt.
“Though the firm is looking for a strategic investor, we opine that the cement maker should cut its losses in Tanzania and focus on the stable Kenyan business. Management however remains optimistic of a turnaround in the fortunes in Tanzania given that coal availability has been resolved. In addition, the cement prices in the country have stabilized and ARM Cement has commenced selling clinker to several cement makers in the country. Despite this, we are of the opinion that these steps will take time to make a significant impact on its books; time that the company apparently does not have.” notes Harrison Gitau, Senior Research Analyst Apex Africa Capital Ltd.
