Athi River Mining bets on new funding to boost its earnings
Athi River Mining (ARM) Cement expects profitability to improve with the recent capital injection of $140 million (Sh14 billion) from a British government-owned fund, CDC Group, to finance the setting up of a new clinker plant in Kitui County, ARM Managing Director Pradeep Paunrana has said.
ARM, which is East Africa’s second biggest producer after Bamburi Cement, posted a net loss of Sh267 million in the first six months to June 30 this year, which Mr Paunrana on Friday blamed on a tough operating environment for its Tanzania business, increased financing costs as it commissioned a new plant in Tanzania as well as high energy costs.
“The period witnessed increased competition in the cement market in Tanzania with a new entrant, which resulted in downward pressure on prices,” said Mr Paunrama in regulatory filings. “Prices were 33 per cent below last year in Tanzania.
EBITDA (Earnings before interest, taxes, depreciation and amortisation and other non-cash expenses) reduced by 17 per cent to Sh1.6 billion, having been affected by higher energy costs.”
Positive outlook
Mr Paunrana said amid the reported loss, he expected a positive outlook for the second half of the year on the back of huge cement demand in the region and its fresh financial muscle to support expansion.
“Despite the competitive pressure, the company is positive about the outlook, with cement consumption in the region growing at about 10 per cent per year,” he said.
The shareholders of the company approved the investment by CDC Group last week.
“This equity investment, which will be applied towards the repayment of debt and strategic capital investment to support the group’s expansion plans, will significantly reduce interest cost, leading to improved cash flow and profitability,” he said.
The firm’s group revenue for the first six months dropped by 13 per cent compared to a similar period last year Sh6.6 billion.
