mbulelo smpofu
Nqobile Bhebhe, nqobile.bhebhe@chronicle.co.zw
KHAYAH Cement Limited, a leading cement manufacturer, has voluntarily entered corporate rescue proceedings to address operational and financial challenges.
The move, enabled by the Insolvency Act, aims to restructure the company’s operations, safeguard stakeholders’ interests, and avert liquidation.
In an update, the company said its challenges were unexpected equipment breakdowns, including the Vertical Cement Mill and the kiln. The Vertical Cement Mill, an energy-efficient grinder for producing fine powders, and the kiln, critical for manufacturing clinker, suffered major failures.
The kiln, mothballed in 2023, forced the company to adopt a grinding station model, relying on expensive imported clinker to maintain market presence. Clinker is a primary raw material for cement production, and the shift significantly increased costs.
It further said its troubles were compounded by sanctions imposed on one of its consortium members, which holds a controlling stake.
These sanctions, implemented by the United States Office of Foreign Assets Control (OFAC), affected Fossil Agro, Fossil Contracting, and Obey Chimuka, leading to trade restrictions.
“Trade restrictions which were imposed on one of the members of the consortium that purchased a controlling stake in the company resulted in the withdrawal of critical support and service provision by financial institutions,” said the company in a statement.
“Certain key suppliers also withdrew their services making the purchase of goods and services very expensive. Agitation among creditors on account of debts that were outstanding for extended periods has resulted in escalations with some resorting to legal action.”
The company said to avert negative legal consequences and damage to its assets and reputation, it was obliged to make burdensome payment plans.
The impact has been an extraction of working capital from current operations in the process constraining working capital, recovery momentum and profitability.
The firm noted that it has a strong, well-known, high quality and well-accepted brand in the market and often fails to meet demand because of attendant liquidity constraints.
The overall market demand continues to grow driven by the segment of individual home builders as well as the ongoing major Government infrastructure development projects.
It believes that a change in the operating model back to the integrated model with own manufactured clinker — anchored by an efficient operational kiln will bring costs down to levels adequate to procure sustainable profit and deflect competition from cheap imports.
“This, together with other restructuring initiatives —financially and organisationally, will lead to recovery of the business. Already, the business undertook, earlier this year, a staff rationalisation exercise at a cost of US$700 thousand that has resulted in a notable reduction in monthly operating costs,” it said.
“On this basis, and to afford the company an opportunity to recover and be restored to a sound financial footing, the board resolved to place the company under corporate rescue with immediate effect.
“It is the board’s firm belief that the corporate rescue process will facilitate a restructuring of the company and its finances while securing a basis for a profitable grinding station model including working capital capacitation pending recommissioning of the kiln. It is necessary therefore to commence the business rescue process without any further delay and ensure that the assets and business of the Company are protected.”
Despite its challenges, Khayah Cement continues to supply high-quality cement to meet growing market demand, driven by individual home builders and major Government infrastructure projects. The company remains optimistic about its brand strength and ability to meet demand once liquidity constraints are resolved.
The corporate rescue process is expected to provide Khayah Cement with the opportunity to recover, restore profitability, and deflect competition from cheaper imports.
Siphakeme .Mnindwa
