Shareholders in East African Portland Cement Company will forego dividends for this year as the management ploughs back profit into projects meant to help the firm withstand increased competition.
The decision not to pay the dividend despite a 40 per cent growth in operating profit is also informed by a foreign exchange loss of Sh415m incurred on a yen-denominated loan that has been straining the company’s cash flow for years.
Despite unsuccessful efforts to amortise this loan, general finance manager, Mr Kephar Tande, said it was still a cheaper source of financing compared to borrowing from local banks.
Mr Tande said the company was trying to enter into a hedge arrangement that would make the foreign exchange exposure more predictable.
The firm also attributed the decision not to pay out dividends to capital requirements for the new coal firing facility that will cut energy costs.
“Energy is the biggest cost driver and this facility should cut costs by up to 30 per cent,” managing director, John Nyambok, said.