East African Portland Cement Company (EAPCC) is KSh 10.2 billion insolvent after it failed to repay a long-term loan owed to KCB bank. Auditor General Nancy Gathungu’s report to parliament shows that EAPCC current liabilities outstripped its current assets by 66% in the year ended June 2019.
“The movement was largely due to the transfer of long term loans to current liabilities on account of default on existing loan covenants”Auditor General Nancy Gathungu
Business Daily reports that EAPCC breached terms of its loan with KCB by failing to maintain a covenant on interest rate payment and positive working capital. As a result, the bank reclassified its KSh 3.3 billion non-current loan as a current liability as at June 30 2019, weighing on the cement maker’s solvency.
By June 2019, the cement maker’s reclassified debt was at KSh 5.53 billion against assets valued at KSh 4.22 billion.
SEE ALSO: KCB Recalls KSh263 Million Loan to EAPCC
EAPCC’s Unpaid Taxes, Supplier Dues
The company continued to operate at suboptimal capacity due to capital hitches, as well as the lack of essential spare parts and a dwindling market share. As a result, EAPCC is yet to pay its suppliers and relevant authorities including the taxman.
The cement maker is yet to remit Ksh 376 million in PAYE for the twelve months to June 2019. it holds a cumulative provision of KSh 945 million in unremitted PAYE and KSh 496 million in penalties.
According to the auditor general’s report, Portland Cement did not remit Ksh 221 million in VAT principal and penalties, as well as Ksh 63 million in interest.
Beyond taxes, the company owes Ksh 91 million in unremitted employee pensions dating back to August 2018, as well as Ksh 337 million in cement levy.
The company failed to remit Ksh 102 million worth of dividends to the Unclaimed Financial Assets Authority. Additionally, it owes workers salaries estimated at KSh 1.7 billion. Its debt to suppliers stands at Ksh 411 million, while claims towards terminated contracts, disputed deliveries, and breached contracts total Ksh 173 million.