UAP takes Sh300 million hit from ARM bond

UAP wrote off Sh400 million in the bond and bank deposits. FILE PHOTO | NMG 

By PATRICK ALUSHULA
More by this Author

Summary

• Investment firm posts Sh518m loss, writes off Sh100m in bank deposits.
• The write-off formed a huge chunk of the Sh780 million impairment that the group made in the financial year ended December 2018.
• Group Financial Controller Agnes Chege said with the transition from International Accounting Standard (IAS) 39 to IFRS 9, the group decided to impair all debts above 365 days. This led to the high write-offs.

Investment and insurance group UAP Holdings has written off Sh400 million bond and deposits in troubled ARM Cement and Tanzania’s Bank M.

The firm, which posted Sh518 million net loss — the first since 2010 — disclosed on Tuesday that it has had to impair Sh300 million corporate bond in ARM and a further Sh100 million it held as deposits in Bank M.

“Over a couple of years, we have seen several defaults. That means we have to be more vigilant in terms of where we make investments. We have now tightened credit criteria for our counterparties.” group CEO Peter Mwangi said. “We want to deal with people whose creditworthiness is above a certain threshold. We have made the write-offs but will keep up efforts of recovery.”

Related Content

• UAP sinks in first loss in 10 years
• Wanjui, Muguiyi to pocket Sh3.1bn in UAP share sale
• UAP-Old Mutual lays off 89 as profit in H1 drops

Both ARM Cement and Bank M were placed under administration in August last year over debts and critical liquidity problems. UAP has operations in several markets in the region including Tanzania, where it had deposits in Bank M.

Impairment

The write-off formed a huge chunk of the Sh780 million impairment that the group made in the financial year ended December 2018.

Group Financial Controller Agnes Chege said with the transition from International Accounting Standard (IAS) 39 to IFRS 9, the group decided to impair all debts above 365 days. This led to the high write-offs.

“We believe that the Bank of Tanzania is taking adequate action to help us recover all the amounts held in Bank M and hope to hear from them in terms of what they will be able to recover,” she said.

Mid-January, Tanzania’s central bank Deputy Governor Bernard Kibesse announced that the assets and liabilities of Bank M had been transferred to Azania Bank.

Sanlam Kenya also plunged into a Sh1.97 billion full-year net loss - the first in 15 years - majorly on account of Sh1.14 billion write-offs, primarily debt notes and equity in Kaluworks, Real People and ARM.

It lent Sh169 million to Kaluworks, Sh574 million to ARM and Sh398 million to Real People.