Regional cement maker ARM Cement could be forced to delist from the Nairobi Securities Exchange if negotiations with three potential buyers do not succeed.
Pradeep Paunrana, the firm’s chief executive officer, told The EastAfrican that he hopes to conclude negotiations with the firms, which he did not name, in the next 90 days.
ARM hopes that a pledge of support by the Tanzanian government — which could see the country’s National Social Security Fund invest in the company — would facilitate a deal with the Africa Finance Corporation to convert its $92 million loan into long-term debt, with a tenure of at least 10 years.
ARM currently needs at least $50 million to repay some of its loans amounting to $140 million.
“We made mistakes and hope to correct them by bringing in a strong partner with a long-term view,” Mr Paunrana said.
ARM is majority owned by CDC Group of UK, which controls a 40 per cent stake, then the Paunrana family a 30 per cent stake and the remaining 30 per cent by the public.
Although CDC’s plans in ARM remain unclear, it recently replaced two board members. The group’s investment in ARM has been significantly diluted from $140 million in 2016 to about $10 million currently.
“CDC has incurred a huge paper loss, but I don’t think they would want to exit at this point,” said Mr Paunrana.
Over the past three years, the company’s fortunes have taken a turn for the worse.
Last year, it posted a pre-tax loss of $74.7 million compared with $38.2 million in 2016.
Its net losses have increased to $65 million and short-term liabilities exceeded current assets by $134 million, prompting its external auditor Deloitte & Touche to withhold its opinion on the firm’s published accounts.
“These conditions combined with the historical performance of the group show that a material uncertainty exists, which may cast significant doubt on the group’s ability to continue,” Deloitte said in its report.
Analysts at Standard Investment Bank (SIB) say that due to its distressed liquidity position, the company can barely meet its immediate obligations.
“Asset disposal is the most viable option for ARM, and could involve a look at the Tanzanian unit,” said SIB.