ARM to offload fertilizer unit as cement maker sinks to Sh2.8bn loss

ARM to offload fertilizer unit as cement maker sinks to Sh2.8bn loss

ARM Cement plc has announced plans to sell its non cement business in an effort of raising cash to grow its core business.

ARM, which wholly owns Mavuno Fertilizers, says the move will unlock working capital that will be channeled back into its cement operations and lead the firm back to profitability.

The decision is part of an elaborate plan by ARM to consolidate its business in 2017, focusing on cost cutting, improving distribution channels as well as improving operational efficiencies.

“Further, in order to remain focused on the cement business and to raise cash and release a significant amount of working capital locked up in Mavuno Fertilizers division, the company decided to exit all of the non cement businesses,” ARM said in a statement.

In the 2016 financial year, ARM sunk to a Sh3.2 billion loss before tax from a Sh7.2 billion profit before tax a year earlier.

The poor result came as the cement maker faced declining revenues as well as mounting interest payments on its debt.

The drop in revenues was also affected by a drop in cement prices in Tanzania.

ARM was forced to buy local coal for its Tanzanian plant which also led to an increase in operating costs.

Revenues during the year fell 13 percent to Sh12.8 billion from Sh14.7 billion in 2015.

“Interest burden increased substantially in 2016, at Sh2.8 billion, up by nearly Sh1 billion over the previous years,” the firm said.

ARM’s loss came even as the cement maker received Sh14.1 billion from its new majority shareholder CDC from the United Kingdom.

The firm was able to reduce its overall debt from Sh24 billion to Sh13 billion.

The cement business in Kenya remains highly competitive as players look to lower overheads and compete with cheaper imports.

To boost production in 2017, ARM plans to complete expansion of its Athi River based grinding facility, increasing production to 600,000 tons per year.

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