[2008-08-07]  Kenya's ARM sees 22 pct profit growth in 2008
Kenya's Athi River Mining (ARM) expects to maintain 22 percent earnings growth this year, managing director Pradeep Paunrana told Reuters on Friday.

"We are looking at maintaining a 22 percent growth in sales, while for the bottom line we are looking at similar growth," Paunrana said in an interview.

"Based on the six months figures, we are confident we can achieve that."

Kenya's No.3 cement maker by market share posted a 22 percent rise in pretax profit to 349 million shillings in the first half of 2008, compared with H1 last year.

Paunrana said inflation -- which raced to a near 15-year high of 31.5 percent in May, before retracing to 26.5 percent in July -- was a challenge to growth.

"The danger we see ahead is inflation, increased costs of manufacturing and production and we are not sure we can pass all our costs to the customer, therefore our margins will temporarily go down," he said. "But over a period of time, as things stabilise, we should be able to recover."

He said ARM is counting on product and market diversification to meet its profit forecast.

"The economy generally is still growing. The regional economy is still strong, as long as the government keeps looking at the infrastructure needs of the country, demand for cement is going to keep on growing," said Paunrana.

He added the fast growing economies of Uganda, Tanzania, Rwanda and southern Sudan would also boost sales.

FERTILISER

Paunrana said ARM is raising capital to expand its business, but did not give more details. Cement accounts for 50 percent of the company's business. The firm also makes fertiliser, as well as industrial and chemical products.

Paunrana saw the fertiliser business growing in 2008 to account for 10 percent of group turnover, up from 5 percent.

Kenya needs about 200,000 tonnes of fertiliser each crop season, most of it imported by a 9 billion shillings a year industry. Paunrana said this demand could increase if fertiliser was made available by local manufacturers.

"The vast majority of farmers in this country are not able to obtain fertilisers in a timely manner, due to import restrictions and international prices" he said.

ARM shareholders resolved in June to turn the company's three divisions -- cement, fertiliser, and industrial and chemicals -- into wholly owned subsidiary companies.

"That decision will become operational in January 2009. Each subsidiary company will be able to raise its own capital and to restructure its strategic investment plan, independent of the other two in the group," Paunrana said. "Our investors will be able to invest in asset-class specific investments. They will be able to target their investments."

Some 6,000 individuals own 25 percent of ARM through the Nairobi bourse while France's Lafarge has a 14 percent share. The founding Paunrana family owns about 50 percent.
Source: © Reuters 2008.