Over 2,000 employees of the Nairobi Securities Exchange-listed cement maker ARM are facing a grim future following months of delayed payment of salaries that have stalled their pension and medical insurance benefits.
ARM stopped remitting staff pension contributions in June 2017 and has since announced plans to officially suspend payment of the retirement benefits on June 30, 2018.
The cash crunch, which ARM attributes to difficult market conditions, is the latest signal that the company’s year-long efforts to raise funds from asset sales as well as bring on board a strategic investor are yet to bear fruit.
ARM wrote to its saying: “As you are all aware ARM Cement is experiencing some financial challenges due to difficult market conditions. This has forced the company to restructure and reorganise its priorities to ensure it can continue carrying on its business and most importantly to save the jobs of all its staff.”
The cement manufacturer contributes to its employees’ retirement scheme at a rate of 5% of their basic pay, with workers making a similar contribution.
ARM said staff opposed to the cut in benefits should lodge their objection by the end of this week, indicating that they could be retrenched thereafter. Those who accept the changes will have their contracts amended on or before May 31.
Suspension of the two benefits comes amid erratic salary payments and failure to remit pension contributions since June last year.
Affected staff said that they plan to seek the intervention of relevant regulators, including the Retirement Benefits Authority (RBA).
ARM’s chief executive, Pradeep Paunrana, had not responded by the time of going to press.
Stock performance
At the stock market, the company’s shares traded at a new low of Sh4.05 yesterday, giving it a market capitalisation of just Sh3.8 billion.
The Paunrana family and British investment fund CDC Group top the list of big losers in the stock rout. CDC’s 41% stake in ARM now has a market value of Sh1.4 billion or 10% of the Sh14 billion it invested in August 2016.
ARM has warned investors that its net loss for the year ended December 2017 will widen by at least 25% from Sh2.8 billion a year earlier. The upcoming results are expected to give investors an update on the depth of the company’s capital needs.
The cash injection by CDC has been insufficient to stabilise ARM, whose efforts to raise new capital have dragged on for years.
The cement manufacturer earlier announced plans to sell its non-cement businesses for Sh1.6 billion.
CDC, one of the largest investors in Africa with assets of more than Sh600 billion, appears to have sidestepped ARM’s new capital raising plans.
The company’s executive director, Rick Ashley, who previously held the position of chairman, resigned earlier this month amid the turmoil.
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