CDC changes leadership at ARM to halt the decline

British development financiers CDC have brought in Sophia Bianchi and Rohit Anand as new directors at ARM Cement, to replace replaced Ketso Gordhan and Pepe Meijer, after seeing its investment in Kenya’s Athi River Mining (ARM) plummet buy more than 90 per cent in just three years.

CDC reported a KES6.9bn (US$68m) loss for the 2017 financial year on declining sales. The UK-based investment firm had to act to try and halt the slide.

"The replacement of two board nominees…bring in substantial experience in turnaround situations and financial restructuring in emerging markets," the board said in a press release.

The British firm bought a 42 per cent stake in ARM Cement in April 2016 for KES14bn when the company's shares were trading at KES37 with a market capitalisation of KES35bn. In a steep descent, the share price stood at KES2.95 by Thursday's closing with the firm's market capitalisation of KES2.8bn putting the CDC investment at about KES1.1bn.

ARM has been left with soaring loans, price wars and under utilisation of its clinker plant in Tanzania due to a government ban on coal imports. According to the financials, money generated from operations fell by more than 70 per cent from KES1.6bn in 2016 to KES473m last year.

Theer has been no sign of a turnaround in fortunes for ARM in 2018. A GFK Bimonthly Retail Report showed that between January and February 2018, Athi River Mining's Rhino Cement and East African Portland Cement's Blue Triangle brands lost ground to rivals Bamburi, National and Mombasa. Bamburi grew 33 per cent, while Mombasa and National Cement gained to close 20.3 per cent and 19.3 per cent respectively in February 2018.

Across the border, ARM said the entry of a new player in southern Tanzania sparked a price war that slashed prices by about 30 per cent. "Two of the existing players increased capacity and the overall supply in cement was significantly higher than demand," said ARM Cement.