Cement manufacturer East African Portland Cement
(EAPCC) is set to retrench more than two thirds of its staff in a
restructuring plan which will cost the State-owned company about Sh2
billion.
The Nairobi Securities Exchange-listed firm,
which was has been ruled technically insolvent by the auditor general,
says it will plans to lay off over 1,000 employees, reducing its staff
count to 500.
The loss-making company has offered the
government 2,000 acres of its idle land for Sh10 billion to be used to
turnaround its fortunes including paying for the voluntary retirement
programme.
“We are overly overstaffed with our employee
numbers at over 1,500 and close to 2,000. By benchmarking with the rest
of the industry we need only 500,” said Bill Lay, Portland’s chairman.
Mr
Lay said staff reduction was a major priority as it was an investment
with a shorter payback period with payroll savings expected to recoup
the cost in two years.
Portland reported an operational
loss of Sh1.6 billion for the year ended June with staff costs
representing 31 per cent of its revenue at Sh2.7 billion.
The
company owns more than 14,000 acres of land which has attracted the
attention of the government which has plans to build industrial parks
and extend the Export Processing Zone.
The
government holds a 25.3 per cent stake in Portland while the National
Social Security Fund has 27 per cent. LafargeHolcim, which also has a
stake in Portland’s rival Bamburi Cement, owns a 41.7 per cent stake.
Machine
breakdowns and operational inefficiencies have seen the company
fortunes turn for the worse and its market share shrink to 11 per cent
from 23 per cent three years ago.
The cement maker
plans to spend Sh6 billion of the cash it raises from mortgaging its
land holdings to settle outstanding debts with the balance of Sh2
billion going towards its production plant upgrade.
International financiers
Portland’s
current liabilities of Sh4.96 billion have grossly exceeded its current
assets of Sh2.1 billion indicating that if its creditors recalled their
debt the firm would not be in position to settle them.
Mr
Lay disclosed the company is also looking for cash from international
financiers even as it urges the government to sell some of its
shareholding.
Portland’s
rival Bamburi reduced its staff numbers by 71 last year following
layoffs and voluntary early retirements. Bamburi, which enjoys the
largest market share in the industry has 851 employees with a payroll of
Sh1.9 billion.
Several other manufacturing companies
have announced plans to cut jobs underlining concerns over the health of
East Africa’s largest economy.
Mr Lay said the
company plans to close its factory in March next year to allow it
refurbish its kiln in an attempt to increase its capacity.
The
factory has a capacity of 450,000 metric tonnes an year — but it
produced 380,000 metric tonnes in the year to June due to breakdowns. It
expects to increase capacity to 480,000 after the refurbishment.
Ernst
& Young is currently conducting a forensic audit at Portland in an
effort to seal operational gaps that may have been exploited by
unscrupulous employees to enrich themselves.
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