Kenya’s East African Portland Cement is concerned rising production costs will shrink profit this year as it seeks to raise capital through a bond or rights issue for expansion into Uganda, its head said on Friday.
"We will probably be thinking of a rights issue for the new large factories we want ... probably next year," Kepha Tande, managing director of East African Portland (EAPCC), told Reuters in an interview.
He added a bond issue was another option, but declined to say how much the company planned to raise.
Tande said construction of a grinding plant in Uganda with annual output capacity of at least 500,000 tonnes is expected to begin next year at a cost of between 3 billion shillings and 8 billion.
EAPCC, also an exporter to Tanzania and Rwanda, is grappling with costs. Tande said these had risen by 20-25 per cent in the last few months, a factor expected to dent profit.
"Costs are escalating at a very high rate, faster than our revenues are able to grow. At the same time, we have pressure on prices," said Tande.
"We expected at least KES1bn in net income (for the year to June 2012) but now we probably expect 20 percent less than that."
Depreciation of the local currency, which has lost more than 14 percent, has added pressure as has unreliable power provision from the country’s sole distributor, Kenya Power Company.