The 2009 East African Portland Cement Company (EAPC) annual general meeting (AGM) was held at the company’s sports club in Athi River on November 19. The company is the second-largest cement producer in the country, but has one of the smallest shareholding pools, with just 996 shareholders. One of its largest shareholders is rival cement company Lafarge who were evicted from the board of Athi River Mining (ARM), another cement company, earlier this year.

What would have been a tough year for the company was smoothened over by an ‘other income’ boost

Shareholder questions:

How will Portland compete with the many new opening cement companies in the country? – Mombasa Cement has launched plant in Athi River, while ARM is building a new large cement plant in Tanzania?

• By externally increasing sales in the region –  to Uganda, South Sudan, Burundi, and the Democratic Republic of Congo (DRC)
• More media advertising to promote their cement brand (Blue Triangle) and they are relocating sales & marketing department from Athi River to Nairobi.
• Internally improving processes e.g. use cheaper fuel, apply cheaper distribution methods. Also plan to install a new kiln to produce clinker for the company’s operations and sell the excess as exports to other cement companies (they have appointed consultants to begin the process of commissioning the 5,000 metric tons per day plant).
• By Going Green initiatives: while cement companies not associated with environmental causes, but rival Bamburi (Lafarge) was able to create a beautiful Wildlife park (Haller Park) from a depleted quarry. Now Portland has signed up with the JP Morgan climate care program, and by reducing fuel oil they use in operations and carbon emissions, the company earns about 80 million per year (~$1 million). Also for some of their exhausted land in Athi River, they have applied for a Kshs. 250 million environmental grant from the (Kenya) Prime Minister’s office towards the planting of 4 million jatropha trees whose seed oil will be used in kiln operations and earn more carbon credits.

What will happen to idle plant/asset/farm?

• Farm animals were sold as it was a loss-making venture and animals would have died of drought if they had been kept. The idle farm will be planted with jatropha forest, to prevent squatter encroachment.
• Useable old mill machinery will be shifted to other countries to reduce the cost of production of some cement. Unusable plant parts (old technology) were to be sold, but global economic crunch meant that steel prices plummeted and so they have halted this until prices pick up later.

Poor dividend and share price: DPS is always 1.30, while EAPC shares rarely trade/move up or down

• Shareholding structure is Government of Kenya – 50%, and Lafarge (France) – 42% and what is traded is from the small 6% owned by the public. The Board did not answer if they would emulate ARM and boot Lafarge/Bamburi (more difficult to do here)
• Reserves are there but some can’t be paid out i.e. asset evaluation reserves.

Yen-denominated Japan loan: Portland received a 20 year 2.5% loan from Government of Japan that has now become a burden to pay as the Japanese Yen has gotten stronger over the years (the company lost them 921 million in 2008, and still has 10 years to go with the loan). The Board is aware of constraints and shareholder concerns and so the company will look at hedging to resolve the costly loan issue by next year.

Sticky Issues: Shareholders asked why they were being asked to re-elect directors who skipped AGM’s – Titus Naikuni (CEO of Kenya Airways) and Joseph Kinyua (Permanent Secretary, Ministry of Finance), and why the Government’s Controller & Auditor General was listed as the Portland auditor and gave an opinion, yet contracted the audit function to audit firms (this year’s done was by Ernst & Young, and the previous one by Deloitte).

Goodies: Buffet lunch, umbrella, tote bag (with cap, polo shirt).

Odd moment: Prayer by famous shareholder Mr. Chami before and after the meeting.