ARM Cement looking for a strategic investor

Kenya’s ARM Cement is seeking a strategic investor to provide equity capital, the chief executive said on Friday, after its shares plunged following problems in producing clinker and other challenges at its new Tanzanian operations.

Kenya’s second-largest cement maker behind LafargeHolcim’s Bamburi Cement has posted losses in recent years as returns from its expansion into Tanzania failed to meet expectations. It has sold some assets to reduce debt.

ARM’s shares have plunged 85 percent in the past four years, tumbling from 98 shillings ($0.95) per share to Friday’s close of 14.30 shillings.

Commenting on the search for a partner, CEO Pradeep Paunrana told Reuters: “The process is open and it may be an injection of equity, it may be partial sale. It could be any structure the board will decide on.”

He said there had been “significant interest”, without offering details. ARM was being guided by a London advisory firm that specialises in the cement industry and building materials, he said, without naming it.

Global cement firms have been seeking to expand in Africa to take advantage of rapidly growing economies and major public transport and other infrastructure projects.

Some firms have sought to expand through acquisitions. Nigeria’s Dangote Cement, majority owned by Africa’s richest man Aliko Dangote, is keen to buy South Africa’s PPC.

ARM’s CEO also said the firm, which has total debt of $125 million, in talks with creditors to restructure $100 million of short and medium-term debt into 10-year borrowing.

Paunrana said ARM’s challenges stemmed from its operations in Tanzania, where it invested in a clinker plant and a grinding plant five years ago.

“The last three years in Tanzania we have had a very difficult operating environment,” he said. “It has left a gap in the balance sheet of the company which needs to be filled.”

He said the situation had improved in recent months after the end of persistent coal shortages that hampered clinker output.

The Tanzanian government had also started to encourage local cement grinders to buy clinker locally, rather than importing the material used in cement making, he said, adding that this was boosting demand for ARM’s clinker and offering good margins.

ARM has clinker production and grinding capacity in Kenya, Paunrana said, along with substantial limestone deposits, used to make clinker. “It is a very strategic asset which is attracting global attention,” he said.