Intrigues hide Portland’s poor performance

By Dominic Odipo

Kenya: What exactly is going on in the board of Athi-River based East African Portland Cement Company (EAPCC) Ltd?

Are the company’s directors and chairman reading from the same script, or is there a deep rift among them that could hurt the giant cement maker’s operations?

In a letter addressed to the EAPCC company secretary, and dated November 25, 2013, the director representing NSSF, one of the company’s larger shareholders, stated:

“In accordance with Article 60 of the Articles of Association of East African Portland Cement Company Limited, the National Social Security Fund Board of Trustees wish to give notice of its intention to propose a special resolution and if thought fit passed as a Special Resolution that Article 82 of the Articles of Association of the Company be amended to increase the maximum number of directors of the Company from seven to eleven.”

Upon receipt of the said notice, the company secretary responded by advising the NSSF that since the amendment sought would in effect alter the company’s Articles of Association, it therefore required a Special Notice and that by the time the said notice was received, the notice and the agenda for the 81st Annual General Meeting scheduled for December 17, 2013, had already been circulated.

Earlier at a board meeting preceding the AGM, Dr. Wilson Songa, a proxy for the National Treasury and Gideon Kyengo for the Attorney General demanded that the nomination of William Lay and the increase of the directorship be accepted.

Then, on December 9, 2013, the company secretary received another Notice of Nomination by Cementia Holding AG, another shareholder, proposing the election of Didier Tressarrieu as a director during the 81st AGM. These statements raise a number of fundamental questions. What was the purpose of NSSF’s late application? If it was deliberate then why? What purpose would be served by diluting or enlarging the board of the company?

Could there be some board agenda which the board as currently constituted has failed or refused to pass, but which an enlarged board properly directed could be counted upon to pass?

During the meeting, the chairman,closely following the Articles of Association, put the resolutions (approval of financial accounts and payment of dividends) to vote by a show of hands.

Both were passed, although the Principal Secretary for  Industrialisation and a representative of NSSF, made allegations concerning financial accounts approved prior to the AGM, and also covering staff bonuses and director fees.

The Government and NSSF did not approve the financial accounts.

Since then, the Capital Markets Authority has stopped the Company from paying out dividends and effectively suspended all the resolutions passed at that AGM. But, in response, the company has gone to court, seeking to stop CMA from enforcing the order, saying such action is likely to ground its operations, inflicting irreparable loss and damages.

The cement market in Kenya has grown significantly over the last few years. New players have entered the market, apart from the initial three clinker and cement manufacturers: EAPCC, Bamburi and Athi RIver Mining.

There are now seven cement companies competing. Two new entrants have expressed interest in investing in cement capacities in Kenya. Bamburi is the Kenyan market leader, with a 40 per cent market share in 2013.

The strategic priority of EAPCC now should be to improve its performance and profitability. 

The writer is a lecturer and consultant in Nairobi.

dominicodipo@yahoo.co.uk