East African Portland Cement Company (EAPCC) is considering sale of some of its assets to pay dividends to shareholders.
In a statement on Wednesday, the company said it would unlock value from its Athi River land and is working towards raising capital for continued factory modernisation, including the installation of a second clinker line - all without incurring additional debt.
This is expected to end a decade-long dividend freeze following financial problems that befell the firm in the early 2000s.
Since June 2011 when shareholders got Sh0.50 per share, the firm's financial position has been to weak has been too weak to reward shareholders.
The closest EAPCC came to paying dividends was in 2013 when it declared Sh0.75 per ordinary share against a net profit of Sh1.75 billion.
But this never happened after the Capital Markets Authority suspended all resolutions of the 2013 Annual General Meeting, in which the proposed dividend formed part of.
The cement maker's net earnings for 2023 sunk to a loss of Sh1.35 billion from Sh541.59 million reported same time in 2022.
This follows higher landing costs of coal and clinker and elevated thermal energy costs which contribute about 30 per cent of EAPC’s cost of sales.
The cost of replacing a faulty kiln shell plant and elevated forex costs on a weak local currency all outweighed the gains of the new plant's efficiency. Replacing the kiln cost Sh500 million.
In May, the firm resumed operations after a one-month closure for renovations and plant maintenance in a bid to increase capacity to serve the growing regional demand for cement amid an infrastructure boom.
The company's Acting MD 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.
“Dividend payout represents a crucial step in restoring value for our shareholders, with future payouts expected to be sustained by operational profits,'' Osman said.
He revealed that the firm is 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.
EAPC board Chairman Richard Mbithi said production has increased by more than 150 since the recommissioning of the firm’s main production line in Athi River in May.
“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."
He added that the progress reflects the team’s commitment to achieving the targets outlined in a Five-Year Strategic Plan, which aims to reach 83,000 tonnes per month.
The improved capacity is expected to boost the firm’s production ability to one million tonnes annually in the next two years, thereby solidifying its role and its position as a regional cement provider.
