ARM Cement says to boost its Kenya plant capacity in next 12-14 months

ARM Cement plans to expand grinding capacity at its one million tonne-a-year plant in Kenya by 50 percent over the next year to meet rising demand, its chief executive said.

ARM is the second biggest cement producer in East Africa and also has operations in Tanzania and Rwanda.

In 2016, it received a $140 million equity injection from Britain’s CDC Group, which took a 40 percent stake.

Pradeep Paunrana, ARM’s managing director, said in an interview late on Wednesday the money was used to pay debts.

He said its Kenyan plant was at full capacity, and expansion was needed to meet the growing demand for cement in the country.

“We are completing a grinding plant expansion in Athi River which will give us an additional 500,000 tonnes of cement in the next 12 to 14 months,” he told Reuters, referring to the Kenyan plant, which has not been expanded since 2010.

The extra capacity will boost its use of clinker produced from its plant in Tanga, Tanzania, with an annual capacity of 1.2 million tonnes of the raw material.

Paunrana, who did not give the cost of adding production capacity, said it was being funded by internal resources.

He said ARM Cement had an equivalent of $125 million in debt, and will pay it down over a four-year period starting next year.

“Until we use the existing capacity, the company has no plans for increasing any debt or raising any new equity and the internal generation will be used to carry out the improvement projects and to start paying down debt,” Paunrana said.

In Tanzania, ARM has a 1.5 million tonnes-a-year production capacity at two plants of equal size – one in Dar es Salaam, and another in Tanga, which it is finishing building and is expected to start production within the next 12 months.

Its Rwandan operation can produce 100,000 tonnes a year.

Paunrana said demand was seen rising in East Africa over the next few years due to planned infrastructure projects, such as a new railway in Tanzania.

“We feel that cement demand in the region is going to continue to grow at 8 to 10 percent (a year),” he said.

Paunrana said the company was making preparations for another clinker plant in Kitui in eastern Kenya, but no decision would be made on developing it until all its Tanzanian supply had been used.

“There will be no decision taken on any investment until the Tanzania capacity is fully utilised, which will be in another three to four years,” he said.

ARM Cement posted a pre-tax loss of 3.54 billion shillings ($34.21 million) in full-year 2015 due to foreign exchange losses after reporting a 2.02 billion shilling profit in 2014.