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Tanzania’s Tanga Cement Given 15-month Debt Repayment Reprieve

Tanzania’s Tanga Cement Plc has secured an extended 15-month moratorium on its decade-long $142 milion debt to sustain its operations, amid rising pricing wars and high fuel prices in the Tanzanian cement market, which has pushed the cement maker into losses and a three-year dividend drought.

The firm disclosed in its latest annual report (2022) that it has “embarked on a restructuring/refinancing of its existing debt facilities aiming to ensure its long-term competitiveness and sustainability.”

“This will free up the company’s operational cash flows to fund its operations in the ordinary course of business and regularise its working capital facilities over a period,” it said.

The debt-restructuring plan is also aimed to cushion Tanga Cement against the possibility of default and prevents realised foreign exchange losses.

Under the plan, the cement maker, which is listed on the Dar es Salaam Stock Exchange (DSE), has received an exemption from the obligation to make any interest or principal payments on the loan for a duration of 15 months, extending to September 30, 2024.

Tanga Cement took a $142 million loan from the South African Government Employee Pension Fund (GEPF) through its agent, Public Investment Corporation (PIC), in 2013 to finance the construction of a new kiln for the production of 750,000 tonnes of clinker per annum.

The loan with a grace period of three years was classified into three categories: Term loan ‘A’ with a maturity date of 2026 valued at $60 million, Term loan ‘B’ with a maturity date of 2025 valued at $52 million and Term loan ‘C’ with maturity date of 2025 valued at $30 million.

“The extension mirrors the preceding standstill in all aspects including that PIC undertakes not to take any enforcement action against the company nor to terminate the term loan facility during the standstill period and have waived the above financial covenants for the duration of the Standstill Period of 15 months extending until September 30, 2024,” the firm said.

On November 30, 2021, Tanga signed a Standstill and Amendment Agreement with GEPF through PIC, its short-term facility lender AfriSam (Mauritius) Investment Holdings Ltd (the parent company) and its working capital facility providers, Standard Chartered Bank (Tanzania) and National Bank of Commerce.

The agreement granted the cement maker a waiver of the PIC loan default events and the enforcement rights and an interest and principal payment moratorium for of up to 15 months from its signing date.

“The group has successfully entered into a supplementary extension of the Standstill and Amendment agreement,” the firm said.
Tanga Cement posted a net loss of Tsh22.06 billion ($8.8 million) in 2022 from a net loss of Tsh3.54 billion ($1.41 million) in 2021, and froze dividend payment for the third consecutive year.

The firm noted that although the demand for cement products is expected to continue growing in East Africa, new competitors entering the market are expected to put pressure on sales prices and volumes in the near term.

“As one of the large players in the cement and clinker manufacturing business, we face a dynamic operating context that presents both demanding challenges, as well as potentially rewarding commercial opportunities for innovation and sustainable growth,” the firm said.

Meanwhile, Dangote Cement continues to increase plant output, leveraging its gas power plant commissioned at the end of 2020.

Their sales improved during the year with an estimated volume of 1.4 million tonnes, which translated into growth of more than 50 percent and market share of 24 percent per annum since 2016, due to their pricing strategy, improvement of the cement supply chain, and utilisation of distributors across the country.

Source: The East African