EAPCC in surprise dividend plan after sale of idle land

Investments, Trade and Industry Cabinet Secretary Salim Mvurya (second left), Principal Secretary Juma  Mukhwana (left), East African Portland Cement Ag MD Mohamed Osman, Machakos County Lands, Housing , Urban Development and Energy Minister Nathaniel Nganga tour the cement plant in Athi River, Machakos county. [Courtesy]

East African Portland Cement Company (EAPCC) has said it will consider paying dividends to shareholders, which will be funded by the sale of idle assets. 

The dividend payout, which will be the first for shareholders in more than a decade, is despite the company having reported a loss for the year to June 2023, according to its latest year financials. 

The cement maker said the proceeds from the sale of some of its vast parcels of land in Athi River are also expected to finance the upgrade of its factory, including the installation of a second clinker line. 

The firm said the money raised would be adequate to enable it to make the investments without incurring additional debt. 

Acting Managing Director Mohamed Osman said the business has for the first time gone past the break-even point easing the operational challenges and unlocking hope of meeting stakeholders’ expectations.

Chairman Richard Mbithi said termed the move a major win for shareholders.

“Dividend payout represents a crucial step in restoring value for our shareholders, with future payouts expected to be sustained by operational profits. Additionally, we are conducting a Comprehensive Plant Technical Audit to further optimise operations, with plans to increase daily clinker production from 1,680 to 2,500 metric tonnes,” said Mr Mbithi at a function held at the firm’s premises in Athi River yesterday.

Despite plans to pay a dividend, the firm reported a loss last year.  EAPCC slipped into a loss after tax of Sh1.36 billion for the year to June 2023, down from a Sh541.59 million profit after tax it reported in the year to June 2022.

It, however, cut by 10 per cent losses in the half year to December 2023 to Sh720.8 million from Sh801 million a year earlier on revenue growth and reduced expenses.

The major beneficiaries of the planned dividend payout will be the government and French multinational Lafarge, whose combined shareholding in EAPCC is more than 90 per cent.

The government has a 52.3 per cent stake in the firm, of which 25.3 per cent is held by the National Treasury, while the National Social Security Fund (NSSF) owns another 27 per cent.

EAPCC’s rival cement maker Bamburi Cement and its sister companies under Lafarge own a combined 41.7 per cent through Bamburi Cement (12.5 per cent), Cementia Holdings (14.6 per cent) and Associated International Cement (14.6 per cent).

EAPCC recently undertook a Sh400 million upgrade and now says production has increased by more than 150 per cent since the recommissioning of the firm’s main production line in Athi River in May.

The firm plans to increase production to more than one million metric tonnes by 2026 from 310,000 metric tonnes. 

“Since then, activity has surged, with our cement production rising from 20,000 tonnes to nearly 50,000 tonnes per month as of August 2024. This progress reflects our team’s dedication and our commitment to achieving the targets outlined in our Five-Year Strategic Plan, which aims to reach 83,000 tonnes per month,” said Mr Mbithi.