Formerly known as ATHI RIVER MINING, ARM Cement has launched plans to recover from financial woes and struggles due to the ambitious Tanzanian clinker investment that failed to bear fruit as projected. The plant built in 2014 has in three years of operation led to a Ksh. 6.9 billion loss.
The firm through its CEO and main shareholder Pradeep Paunrana, intends to seek short term loans from investors to lift production back to capacity. They also seek a strategic investor to buy in to their recovery plan. This comes after firm earlier in the year announced to sell off its non-cement businesses by adding additional assets in Tanzania worth US$8.5m (over Sh850 billion) for free.
The Tanzanian plant has an annual capacity of 1.2 million metric tonnes and is located in the port town of Tanga. It experienced issues from electricity rationing, insufficient coal supply to increased competition from firms like Nigeria’s Dangote Cement. According to Reuters, throughout the three year period while in operation, the firm has not seen any returns from its largest investment. This crippled the company’s cash flow and ability to meet its debt obligations.
According to the Global Cement website, the company had previously said that it had reached an agreement to sell its fertilizer and mineral production businesses in Kenya.
The company was initially established in 1974 by Mzee Paunrana who saw an opportunity in fertilizer and mineral production that increased farmers’ yields. The sale would be to Switzerland’s Omya & Pinner Heights, a company owned by its ARM’s CEO Pradeed Paunrana, for US$15.8m (approximately Sh1.5 billion). Potential buyers could acquire its non-cement operations in Tanzania for free.
The firm said it was undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems. Through its board announcement, the company apologized to its shareholders for the investment losses.
It further explained that the plant due to the challenges experienced, pushed the price below the cost of production of making the cement. The firm acknowledged a lack of clear communication that had caused anxiety among the shareholders. It further asked for shareholder support as they sail across the most trying time experienced in over 40 years.
The company is confident in the belief that this storm will pass because multinationals usually have a long term horizon and often ride out challenges in one particular market.