A worker at an ARM Cement plant. FILE PHOTO | NMG ARM Cement’s cash crunch saw its net losses widen 64.6 per cent to Sh2.3 billion in the half-year ended June, underlining the company’s urgent need for new capital injection.
The cement manufacturer, which was recently placed under administration by its lenders, recorded a net loss of Sh1.4 billion a year earlier.
The performance was driven by inadequate working capital that resulted in lower production and a 56 per cent sales plunge to Sh2.3 billion from Sh5.3 billion.
“The low utilization level of the assets and a difficult business environment in Tanzania in 2017 is not expected to continue as the operating and business environment has significantly improved with the demand for clinker in Tanzania and the region and for cement with improved pricing,” ARM’s administrators PricewaterhouseCoopers said in a statement.
“With the availability of working capital, the utilisation levels would be normalised.”
ARM lost money from operations in the review period and its cash balance of Sh180.1 million was partly the remnant of borrowings.
The firm’s financial position deteriorated after its major shareholders including the Paunrana family and UK’s sovereign wealth fund CDC Group failed to inject new capital to ease its debt burden.
The cement manufacturer, whose share is currently suspended from the Nairobi Securities Exchange, defaulted on its loans as losses piled up and ate into its capital.
Besides its debt load, the ARM has suffered from intense competition in the regional cement business where rivals are expanding their capacity in what has denied them the power to raise prices despite rising costs.