Sunday, November 22, 2009

East African Portland Cement 2009 AGM

The 2009 East African Portland Cement Company (EAPC) annual general meeting (AGM) was held at the company sports club in Athi River on November 19. Company is the second largest cement producer in the country, but one of the smallest shareholding bases at just 996 shareholders. One of its largest shareholders is rival cement company Lafarge who were evicted from the board of Athi River mining, another cement company, earlier this year.

What would have been a tough year for the company was smoothened over by an 'other income' boost

shareholder questions
How will Portland compete with the many new opening cement companies in the country? - Mombasa Cement launched plant in Athi River, while ARM building new large cement plant in Tanzania

- By externally increasing sales in the region Ð to Uganda, South Sudan, Burundi, and democratic republic of Congo (DRC)
- More media advertising to promote the cement brand (Blue Triangle) and are relocating sales& marketing department from Athi River to Nairobi
- Internally improving processes e.g. use cheaper fuel, apply cheaper distribution methods. also plan to install a new kiln to produce clinker for the companyÕs operations and sell the excess to export to other cement companies (they have appointed consultants to begin the process of commissioning the 5,000 metric tones per day plant)
- By Going Green initiatives: cement companies not associated with environment causes, but rival Bamburi (Lafarge) was able to create a beautiful Wildlife park (Haller Park) from a depleted quarry. Now Portland has signed up with the JP Morgan climate care program, and by reducing fuel oil they use in operations and carbon emissions , the company earns about 80 million per year (~$1 million). Also for some of their exhausted land in Athi River, they have applied for a Kshs. 250 million environmental grant from the (Kenya) prime ministers office towards the planting of 4 million jatropha trees whose seed oil will be used in kiln operations and earn more carbon credits

What will happen to idle plant/asset/farm?
- Farm animals were sold as it was loss making and animals would have died of drought if they had been kept. Idle farm will be planted with jatropha forest, to prevent squatter encroachment
- Useable old mill machinery will be shifted to other countries to reduce cost of production of some cement, unusable plant parts (old technology) were to be sold, but global economic crunch meant that steel prices plummeted and so they have halted this until prices pick up later

Poor dividend and share price DPS is always 1.30 , while EAPC shares rarely trade/move up or down
- Shareholding structure is government of Kenya - 50%, and Lafarge (France) - 42% and what is traded is from the small 6% owned by the public. board did not answer if they would emulate ARM and boo Lafarge (more difficult to do here)
- Reserves are there but some canÕt be paid out i.e. asset evaluation reserves,

Yen-denominated Japan loan Portland received a 20 year 2.5% loan from Government of Japan that has now become a burden to pay as the Japanese Yen has gotten stronger over the years (lost them 921 million in 2008, and still has 10 years to go with the loan). Board is aware of constraints and shareholder concerns and so company will look at hedging to resolve the costly loan issue by next year

Sticky Issues shareholders asked why they were being asked to re-elect directors who skipped AGMÕs - Titus Naikuni (CEO of Kenya Airways) and Joseph Kinyua (Permanent Secretary, Ministry of Finance) , and why the Government Controller & Auditor General was listed as the Portland auditor and gave an opinion, yet contracted the audit function to audit firms (this year was by Ernst & young, previously by deloitte)

Goodies: buffet lunch, umbrella, tote bag (with cap, polo shirt)

Odd moment: prayer by famous shareholder Mr. Chami before and after the meeting

3 comments:

123 123 said...

Great article as for me. It would be great to read something more concerning that theme.
BTW look at the design I've made myself Young escort

joel said...

..unless power prices come down new entrants will face the same overhead challlenges as old or even newer entrants and still they are expected by NEMA and Int'l commmunity to maintain their 'impact on environment' records

bankelele said...

Joel: cement expected to grow in East Africa for foreseeable future owing to construction needs e.g. ARM expect this to be at a rate of 2X GDP, regardless of input, tariff, and power constraints

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