Athi River Mining says new clinker plant to boost profit margins

Posted on : Tuesday , 22nd September 2015

 Athi River Mining (ARM) Cement expects profitability to improve now that it produces its own clinker for its East African cement plants, the firm’s managing director has said. ARM Cement, East Africa’s second biggest producer after Bamburi cement, posted a pre-tax loss of Sh473.5 million ($4.5 million) in the first six months, which the firm blamed on unrealised foreign exchange losses associated with borrowing for its new clinker plant, a vital raw material for cement. Currencies in East Africa, where infrastructure and other construction projects are pushing up demand for cement, have been weakening this year, partly as a result of a global shift away from emerging markets and into the US dollar. Managing Director Pradeep Paunrana told Reuters, a new plant to produce clinker had capacity of 1.2 million tonnes a year and was operating at about 75 percent capacity since production began in April. “What this essentially means is that our production cost has come down drastically because imported clinker is much more expensive -- at least 70 or 80 per cent more expensive than what we are producing locally,” he said in an interview. “So we expect improvement in our margins both in Kenya and in Tanzania with the production of our own clinker,” he said, adding that ARM was also selling clinker to other companies in Tanzania, Democratic Republic of Congo, Rwanda and Burundi. ARM’s operating margin was 13.4 per cent in 2014, according to Thomson Reuters data, compared with an industry median of 15.5 per cent. Production capacity