East African Portland Cement (EAPC) is betting on its new coal-driven plant and the hedging of its yen-dominated loans to return to the profit zone after announcing a Sh292 million loss in the year ended June 2010.
The losses were attributed to rising production costs led by energy expenses.
The firm uses the more expensive fuel to drive its machines as opposed to coal, which is cheaper and less prone to price volatility.
This has seen EAPC absorb huge energy costs estimated at 45 per cent of its production costs as opposed to its rivals’ 30 per cent.
Exchange losses from the Japanese loan have worsened its cost position.
Now, EAPC is set to convert to the coal plant on November 1, and hedge the Japanese loan before December.
“We are working on our high costs and inefficiencies, which with rising demand for cement should better the poor performance this year,” EAPC chairman, Mr Mark ole Karbolo, said in an interview with Business Daily.
He added that the firm is already in the profit zone in the first quarter ended September.
Inflated amount
The cement firm also seeks to get the Japanese Bank for International Co-operation off its back.
“We are about to procure services of a banker for hedging reasons and hope this will be in place by December,” said Mr ole Karbolo.
The Sh1.7 billion was tapped in 1990 and runs to 2020.
It has in the past five years influenced the direction of the cement maker’s earnings with the firm posting huge foreign exchange losses when the Japanese currency strengthens against the Kenya shilling.
The loan stood at Sh3 billion last year, in what analysts attributed to the strengthening of the yen against the shilling over the last two decades.
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