Athi River Mining has posted a loss following sharp depreciation of the Kenyan and Tanzania currencies, pushing up the cost of dollar denominated borrowings.
The cement maker made a loss of Sh355 million in the first half of 2015 compared to Sh847 million in net profit last year but its revenues increased marginally from Sh7.69 billion from Sh7.57 billion.
“The sharp depreciation of both the Kenyan and Tanzanian currencies in the last few weeks has resulted in an unrealised exchange loss of Sh1.4 billion from our US dollar denominated borrowings,” management said in a statement.
Financing costs related to the construction of a clinker plant in Tanga, Tanzania stood at Sh627 million and contributed significantly to the loss.
The clinker is now operating at 70 per cent capacity and is expected to reach full capacity of 4,000 tonnes per day in the next couple of months.
“The US dollar based loans financed much of the construction of the clinker plant in Tanzania, whilst short term borrowings in Kenya shillings financed working capital requirements. Now that the clinker plant is operational, no further major investment is required and the company looks forward to increased sales, financial consolidation and debt reduction,” the company indicated.
In 2012, ARM borrowed $50 million loan from Lagos based Africa Finance Corporation (AFC) in the form of a convertible bond. AFC has the option of converting the debt into equity any time in the six-year period of the loan term, a possibility that could have erased the loss the cement maker made or may make in future as a result of continued depreciation of the shilling.