RESULTS
The Board of Directors hereby announces the half year results of the group for the six months ending June 30, 2017.
The group has continued to experience unprecedented headwinds in Tanzania characterised by increased competition and continued softening in cement prices. This challenging environment has impacted the cement industry as a whole. This translated into a declining contribution from our Tanzanian operations to the group’s topline: turnover for the half year period ended June 30, 2017 was KES 5.347 billion compared to KES 6.670 billion Year-over-Year.

In addition to the difficulties experienced on the market demand and pricing ends, our EBITDA has been severely impacted by the ban of coal imports decided by the Government of Tanzania: it has hampered our ability to achieve reasonable levels of clinker production utilisation rates at our Tanga clinker plant and, as such, impacted higher unit production costs.

These exogenous factors have brought our EBITDA for the six months to KES 261 million.

Cash generated from operations, after working capital changes, for the six months was KES 1.207 billion driven by reduced inventory levels and improved collections from customers.

OUTLOOK
The situation in Tanzania has now began to improve with cement selling prices improving, with a positive impact on cash generation and profitability. Two new coal mines are were started in Tanzania thereby reducing the previous persistent shortage.

Going forward, we anticipate consistent and reliable supply of coal with improved capacity utilization rates at our Tanga clinker plant, paired with uninterrupted supply of clinker to the Dar Es Salaam and Athi River Cement grinding units.

As mentioned, the Company has embarked on a turnaround strategy: management’s focus is on

i) further upgrading ARM’s industrial network,
ii) restoring its financial flexibility and
iii) rebuilding the base for long-term and superior profitability levels.

As far as investments are concerned, the Company plans to grow and strengthen its cement business in Kenya in addition to doubling grinding capacity at its Athi River plant.

The group is at the concluding stage of discussions with a strategic investor for the sale of the non-cement business. The funds from the sale are likely to be received in the fourth quarter of 2017.

On the back of a strategic review it has finalised early in the year, the group has initiated
a process to secure a fresh equity injection from a strategic, long-term minded investor.
Once this process has been completed, the Company’s balance sheet will have the right maturity and interest expense profiles: we are currently discussing with financial institutions, including (but not limited to) international development finance institutions.

The Board and Management trust the Company will re-establish its position in the cement industry once this turnaround has been successfully implemented.

An African chameleon