Athi River Mining sinks into losses on expensive loans

What you need to know:

  • ARM in 2014 took bank overdrafts running into billions of shillings to complete its new clinker plant in Tanzania, loan which have continued to pressure on its cash flow even forcing it to postpone plans to build a new plant in Kitui.
  • ARM initiated a capital-raising drive last year seeking funds to pay off the crippling debt and which culminated in last week’s capital injection by CDC with a majority of the funds (Sh11.1 billion) going towards settling the loans.

Listed cement manufacturer Athi River Mining has posted a full-year net loss of Sh2.9 billion for the 12 months to December on high costs resulting from expensive short-term loans.

The cement maker’s performance represented a sharp decline of 294 per cent from the Sh1.49 billion net profit that it posted during a similar period the previous year.

ARM, which on Friday announced a Sh14 billion equity injection from UK-based financier CDC, took a Sh2.3 billion financing expense hit during the period, dragging the firm into loss-making territory.

“Profit before tax and unrealised gains stood at Sh178 million after finance costs of Sh2.3 billion,” the company said.

The cement maker’s current liabilities, most of which are short-term loans taken to finance expansion, grew by 15.8 per cent to close the year at Sh20.3 billion.

The firm’s financials show that long-term liabilities increased by nearly Sh5 billion to Sh14.8 billion.

“The sharp depreciation of the Kenyan and Tanzanian currencies in the second half of 2015 resulted in the unrealized exchange loss of Sh3.7 billion from our dollar-denominated borrowings,”

Bank overdrafts

ARM in 2014 took bank overdrafts running into billions of shillings to complete its new clinker plant in Tanzania, loan which have continued to pressure on its cash flow even forcing it to postpone plans to build a new plant in Kitui.

ARM initiated a capital-raising drive last year seeking funds to pay off the crippling debt and which culminated in last week’s capital injection by CDC with a majority of the funds (Sh11.1 billion) going towards settling the loans.

ARM’s revenues grew seven per cent to Sh31.12 billion, with the last three months of the year contributing just Sh3 billion to this amount, short of projections by analysts at Standard Investment Bank (SIB).

“Guided by strong quarter three performance, we were optimistic quarter four would deliver positive growth. This was not the case as revenue declined 25.5 per cent quarter on quarter,” SIB analysts said in a note to investors.

SIB also highlighting continued weakness in its ARM core business, as cement sales as a percentage of group sales slumped to 76 per cent which is a four year low for the Kenyan firm.

The analysts noted that while the entry of the well-funded CDC Group will boost the cement maker’s international competitiveness, it is likely that the “more structured owner will dampen ARM’s entrepreneurial spirit.”