East African Portland Cement (EAPC) is betting on its new coal-driven plant and the hedging of its yen-dominated loans to return to the profit zone after announcing a KES292m (US$3.62m) loss in the year ended June 2010.
The losses were attributed to rising production costs led by energy expenses.
The firm uses the more expensive fuel to drive its machines as opposed to coal, which is cheaper and less prone to price volatility.
This has seen EAPC absorb huge energy costs estimated at 45 per cent of its production costs as opposed to its rivals’ 30 per cent.
Exchange losses from the Japanese loan have worsened its cost position.
Now, EAPC is set to convert to the coal plant on November 1, and hedge the Japanese loan before December.
“We are working on our high costs and inefficiencies, which with rising demand for cement should better the poor performance this year,” EAPC chairman, Mr Mark ole Karbolo, said in an interview with Business Daily.
He added that the firm is already in the profit zone in the first quarter ended September.