In the 2000s ARM was a preserve for "bulls" at the NSE. The company rewarded investors extremely well with +1,543.01% returns between 2000 and 2009 (KES 5.81-KES 95.50).
However, in the recent past, Athi River Mining has turned out to be a perennial value destroying counter that even the most uber-bullish investors that would fall for the gloriously decorated Cytton and what used to be Chase Bank would question the company's outlook.
It started with expansion projects as Kenyan cement companies began a race to conquer EasT Africa since East Africa had been a net importer of clinker,a rare and key input in cement production. In this regards, the company commissioned 1.2mtpa Tanga clinker plant in Tanzania in April 2015. Not only did the project took longer than expected but it also blew the budget.
In November 2015, rolled out debt private placement to raise USD 90m. In late December 2015, management disclosed plans of raising USD 125m through convertible preference shares.. Coupled with existing dollar denominated debt and the deep deppreciation of KES in 2015, the company found itself in a precarious financial situation. They managed to bring on board a strategic investor, CDC, who injected KES 14b diluting existing shareholders by 42%.
The company reported a profit after tax of KES 1.493b in 2014 and a loss after of KES 2.8b in 2015.
It further recorded a loss after tax of KES 2.8b in 2016.
The company futher plans to bring onboard a strategic investor and secure more debt from already existing strategic investors in a move that will further diluting its investors. The question remains: How bad can it get for the existing investors?
