Portland nears financing deal for Sh3bn debt

• Kenya’s second largest cement maker in talks with CFC Stanbic for short-term hedging against currency swing, which cost it Sh1 billion in 2008

The company has lately cobbled up a change-management team as it strives to reduce wastage and raise efficiency. The team of 20 includes four directors and works on deliverable targets.

One of the largest investments in Portland technological efficiency of late has been the new “mill number five,” which has cost an estimated Sh1.3 billion and raised installed capacity from 700,000 tonnes to 1.3 million.

The plant, slated to push turnover from Sh7.2 billion to Sh10 billion, is spewing out 80 tonnes per hour and the CEO says this can reach up to 100 tonnes. The 75-year-old firm, largely owned by Lafarge Group and the State, projects a 5 per cent fall in operating costs this year, leveraging on its unique position of operating clinkering plant and a mill in the same location.

Paradoxically perhaps, the new capacity came at a time Tororo Cement, operating in Kenya as Mombasa Cement, is gearing up to put an extra 800,000 capacity in the market. Then factor in the fact that cement consumption is projected to glide down to 8 per cent from 10 per cent this year as the diaspora inflows soak heat from the global meltdown and the domestic economy cooling off. Mega plants are also coming up in Tanzania and a number of other local investors have made some hints about putting up plants.

But Portland believes huge potential exists in the regional export markets — cushioned by Comesa duty until 2012 zero-rating — hoped to provide ready vent for the four million tonne installed capacity that is clearly mismatched with 2.5 million tonne domestic demand. It has put up two depots in Uganda and a bonded warehouse for serving places like Southern Sudan, DRC, Burundi and Rwanda. Both have huge demand with the latter reportedly forced to ration the commodity.

Massive marketing

The firm has ruled out setting up a depot in Southern Sudan. Indeed, the CEO says his focus is to reduce participation in distribution where it maintains 21 manned depots in Kenya while pushing ahead with a massive marketing campaign. This has seen the company train masons and partner with financiers like Housing Finance. Admittedly, distribution is a controversial area at Portland and has contributed to its unflattering public image.

“We want to make a complete break with our past,” said the CEO.

For one, the employees and directors are being trained by, among others, Kenya Anti-Corruption Commission on corporate governance and would be certified at the end.

A stringent recruitment regime for distributors has been put in place to avoid brokers; they need provide two years of audited accounts and taxman certification. If he reins in the currency impact and improves efficiency, the CEO would well be on course for the envisaged industry leadership in 2011.

mwahome@nation.co.ke