Shares of cement manufacturer ARM Cement (ARM) gained 31.2% in the week ended July 6 to finish at Ks4.0. The stock gained after ARM revealed a plan to accelerate disposal of its side businesses and non-essential assets as it works to narrow its focus to its core business of producing cement to capitalize on the strong demand for building materials.
Bamburi Cement (BAMB) gained 0.56% in the week ended July 6 to finish at Ks180, while East African Portland Cement (PORT) fell 9.3% to finish the week at Ks17.5. Bamburi and Portland are ARM competitors in cement business.
ARM selling fertilizer business
ARM struck a deal to sell its portfolio of non-cement businesses in Kenya for Ks1.6 billion. To speed up the sale of those non-essential businesses, ARM has offered buyers of those businesses an opportunity to also take its non-cement assets in Tanzania. The non-cement operations that ARM has earmarked for sale include its Mavuno farm fertilizer business.
Expansion drive left ARM financially strained
Beginning early 2000, ARM tried to expand and diversify its operations, leading it to venture into the business of manufacturing farm fertilizers, industrial materials and an array of other products. But the aggressive expansion drive led the company deep into debt and strained its finances. Therefore, the market cheered the prospects of ARM speeding up its exit from non-cement businesses by bundling its Tanzanian assets in the package of the businesses to be sold.
ARM looking to free up funds
The sale of the non-cement businesses is expected to free up funds that ARM could utilize toward paying down its debt and investing in driving revenue growth in its core cement business. ARM reported revenue of Ks8.7 billion in 2017, down 32% from the previous year.
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