NSSF demands seat on Bamburi Cement board

Bamburi Cement factory in Athi River. NSSF is seeking a seat at the cement maker’s board. Photo/File 

By VICTOR JUMA

In Summary

• Move comes after raising stake and removal of member for not attending successive meetings.

National Social Security Fund (NSSF) is demanding the Bamburi Cement board seat it was stripped of after increasing its stake above the 15 per cent threshold last year.

The fund invested about Sh230 million to raise its stake to the current 15.2 per cent from 14.71 per cent in December 2011.

Bamburi’s Articles of Association guarantees a seat on its board to investors with a stake above 15 per cent. NSSF’s last representative in Bamburi was Alex Kazongo who was removed on February 25, 2011 on claims of failing to attend successive meetings.

“We have written to Bamburi asking for a board seat after increasing our shareholding in the company,” said Tom Odongo, the NSSF managing trustee.

“We are waiting for their approval but our wish has been granted in principle,” he said. Mr Odongo said the NSSF is eyeing more shares in Bamburi, which is expected to maintain its high dividend payout in the coming years.

The cement firm paid a dividend of Sh10.5 per share last year compared to Sh10 and Sh8.5 in 2011 and 2010 respectively.

NSSF earned dividends worth Sh533.6 million from Bamburi for the 2011 financial year compared to Sh453.6 million the year before. The fund is set to earn Sh579.4 million worth of Bamburi dividends for last year’s performance which saw the cement firm set aside a total of Sh3.812 billion for dividends.

Bamburi’s share has gained 17.8 per cent in the past six months to trade at Sh205. Its net profit dropped 16.6 per cent to Sh4.8 billion last year compared to Sh5.8 billion the year before on higher operating costs.

The firm anticipates growth in the short term to be driven by higher demand for cement in the regional market. It is this outlook that has raised the interest of NSSF in the cement manufacturer.

 

“We see Bamburi as a strong dividend stock. We are open to further raising our interest in the company,” Mr Odongo said.

NSSF’s representative will be joining Bamburi at a time when French conglomerate Lafarge has strengthened its position in the cement firm. Lafarge has a 58.4 per cent in Bamburi and last year appointed two of its executives to the cement firm’s board.

It brought Thomas Farrell, operations executive vice president at Lafarge, and Catherine Langreney the CEO of Lafarge Tanzania — pushing the French conglomerate’s representatives to five in the 11-member board.

The quest by NSSF to acquire more shares in Bamburi is a departure from its position in 2011 when it said it will reduce its holding in the cement firm on increased competition in Kenya’s cement sector.

At the time, Bamburi’s sales had dropped from Sh29.4 billion in 2009 to Sh28 billion in 2010, leading to a 24.6 per cent drop in profits.

Researchers at African Alliance Investment Bank said that the two biggest cement makers, Bamburi and East African Portland, had lost significant market shares to new entrants National Cement, makers of Simba brand, and Mombasa Cement which supply the Nyumba brand.