East African Cables Eyes Ksh.2.1 Billion Cash Boost

 

By KephaMuiruri For Citizen DigitaL

• The firm whose financial health is presently in intensive care support is betting on Ksh.1.9 billion ($17 million) inflows.
• EA Cables projects the working capital funding to be available by the end of March next year.

Manufacturer East African Cables Plc is banking on Ksh.2.1 billion liquidity boost to pull itself further from a potential cash crunch.

The firm whose financial health is presently in intensive care support is betting on Ksh.1.9 billion ($17 million) inflows forming part of a rights issue by Transcentury Plc, an associate company and Ksh.210 million from the sale of non-operating assets.

EA Cables projects the working capital funding to be available by the end of March next year.

Funding from the rights issue which already has the approval of TransCentury Plc shareholders is expected to be in the form of a non-funded facility for issuance of letters of credit to suppliers of raw materials.

Meanwhile, non-operating assets listed for sale include a parcel of land in Nairobi registered as LR No 3734/1263 which is tipped to yield Ksh.110 million by the end of this month with the sale agreement already signed and a down-payment received.

EA Cables is further expected to dispose a Mapre Extruder Machine for Ksh.100 million by the end of the year and has started negotiations with a prospective buyer.

While Transcentury does not hold any shares in East African Cables, the firm is technically the manufacturer’s largest shareholder from its interest in Cable Holdings Kenya Limited which holds a 68.37 per cent stake in the cable manufacturer.

The management of East African Cables expects the company to remain a going concern across the next 12 months with its latest audit declaring the firm as technically insolvent with its current liabilities surpassing current assets by Ksh.426 million as of December 31.

At the same time, EA Cables has stepped up collections for long-outstanding receivables which yielded in Ksh.316 million between January and September this year to ease a cash-crunch especially for its Tanzanian business.

East African Cables Tanzania Limited, a subsidiary of EA cables has struggled to access working capital to meet its order book prompting the manufacturer to form a sub-committee to oversee implementation of turnaround initiatives for the subsidiary.

Moreover, EA Cables has completed debt restructure arrangements with SBM Bank Kenya and Ecobank extending loan repayment tenures by 10 and six years respectively.

EA Cables maintains it is on the path to a financial rebound and a possible return to shareholder dividends over the medium term.

“Our business is on the right path to recovery and I am confident that once the turnaround strategy is fully implemented, the business will become profitable and give returns to shareholders,” East African Cables Chairman Michael Waweru said in the company’s 2021 Annual Report.