East African Portland Cement Company (EAPCC) #ticker:PORT has got backing from the Trade Ministry to sell off idle land in its latest push to get out of a Sh15 billion hole that has left it in negative working capital.
Trade PS Betty Maina on Tuesday told Parliament that a Cabinet memorandum is ready for submission to grant the company approval to sell off its assets.
The EAPCC estimates that it requires Sh15 billion capital injection to pay employees’ dues, retire expensive Kenya Commercial Bank (KCB) #ticker:KCB loans, repay a long outstanding Japanese International Cooperation Agency loan, refurbish its plant and settle suppliers’ dues.
“A Cabinet memorandum to this effect has been prepared jointly by the Cabinet secretaries to the National Treasury and the Ministry of Industry, Trade and Cooperatives, which is due for submission towards the end of November,” said Ms Maina.
She told the Senate Tourism, Trade and Industrialisation Committee that the company, which has Sh100 billion assets, does not require government bailout for its turnaround strategy.
It only needs the necessary approvals to pursue available options of raising funds that include disposal of its idle assets and finding a strategic investor, Ms Maina said.
EAPCC, which published its results on Friday past the capital markets regulator’s deadline, posted a Sh7.79 billion net profit up from a loss of Sh1.47 billion in the previous financial year.
A huge chunk of the Sh10.8 billion the cement manufacturer owes outsiders is to KCB, which includes working capital and short-term loans.
The company currently owes KCB Sh4.2 billion. The lender has a legal lien against EAPCC’s four parcels, and a debenture against all assets of the company.
The cement maker’s supplier obligations currently stand at Sh2.6 billion while a similar amount is owed to employees being gratuity dues and compliance with a court order on contract staff dues.
Managing director Simon Ole Nkeri said the company is currently operating below 50 percent of its capacity mainly due to its ageing plant.
“The company urgently requires Sh2 billion to undertake a major shutdown that will necessitate the kiln to be formally stopped and refurbished for at least one to two months,” he said.