EAPC Annual Report FY 2016 17

EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT 2016/2017
BUILDING the NATION
A N N U A L R E P O RT A N D
F I N A N C I A L STAT E M E N TS 2 O 1 6 / 2 0 1 7
1
OUR VISION OUR MISSION

To be the regional To provide Cement for
leader in the provision Infrastructural solutions
of cement, innovative to the satisfaction of our
cement products and stakeholders.
solutions.
Move fast with stable infrastructure

M ar k Z u c ke r b e rg
2
CONTENT
4 Financial Review Financial Statements:
7 Corporate Information 42 Consolidated and Company Statements of

Profit or Loss and Other Comprehensive
8 Board of Directors Income
11 Chairman’s Statement 43 Consolidated Company Statements of

Financial Position
13 Managing Director’s Statement
44 Consolidated Statement of Changes in Equity
17 Sustainability Report
45 Company Statement of Changes in Equity
21 Corporate Governance Statement
46 Consolidated and Company Statements of
25 Report of the Directors Cash Flows
27 Directors’ Remuneration Report
47 Notes to the Consolidated and Company
29 Statement of Directors’ Responsibilities Financial Statements
30 Report of the Auditor General 89 Notice of the Annual General Meeting
90 Notes
93 Proxy Form
3
FINANCIAL REVIEW
FIVE YEAR FINANCIAL HIGHLIGHTS

2017 2016 2015 2014 2013
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Turnover 6,928,307 8,871,456 8,417,621 9,057,292 9,211,462
Operating profit (1,316,283) (1,584,571) (577,579) (92,955) 340,931
Foreign currency exchange gain/ (loss) 134,018 (305,706) 174,834 36,769 594,113
Profit / (loss) before tax (1,712,903) 3,734,752 7,342,071 (373,700) 1,419,478
Taxation credit /(charge) 241,542 411,003 (185,001) (12,931) 355,905
Other comprehensive income
Profit /(loss) attributable to shareholders (1,471,361) 4,145,755 7,157,070 (383,631) 1,775,383
Dividends - - - -

Capital Employed
Assets
Non current 25,408,293 25,727,272 19,955,246 12,393,196 12,531,640
Current 1,949,095 2,114,848 3,157,336 3,324,061 3,602,063
Total assets 27,357,388 27,842,120 23,112,582 15,717,257 16,133,703

Equity & Liabilities
Shareholders funds 16,890,983 17,946,760 13,809,593 6,704,675 7,090,257
Non current liabilities 4,270,192 4,933,240 5,537,618 5,500,293 5,723,968
Current liabilities 6,196,213 4,962,120 3,765,371 3,512,289 3,319,478
Total Equity & Liabilities 27,357,388 27,842,120 23,112,582 15,717,257 16,133,703

Ratio Analysis
Profitability and Efficiency Ratios

Gross profit margin 11% 18% 22% 26% 12%
Operating profit margin -19% -18% -7% -1% 4%
Net profit margin -21% 47% 85% -4% 19%
Return on assets -5% 15% 31% -2% 11%
Return on Equity -9% 23% 52% -6% 25%

Liquidity Ratios /working capital
Current ratio 0.31 0.43 0.84 0.95 1.09
Quick ratio 0.11 0.15 0.35 0.32 0.43

Earnings per Share (Basic and diluted) (16.35) 46.06 79.52 (4.26) 19.73

Dividends per share (Kshs)
Interim Paid
Final & proposed 0.75
Total 0.75
4
FINANCIAL REVIEW
Capital Structure
20,000
15,000
Kshs M
10,000
5,000
-
2013 2014 2015 2016 2017
Net Debt Equity
Percentage Shareholding as at 30th June 2017
6 National Social Security Fund

2
2.5 27 National Treasury
Cementia Holding
14
14.6 Associated International Cement
Bamburi Cement Ltd
1
14.6 2
25.3 Other Investors
5
6
CORPORATE INFORMATION
DIRECTORS
William Lay - Chairman
Simon Peter Ole Nkeri - Managing Director
Kungu Gatabaki
Prof. Sarone Ole Sena
Henry Rotich - Cabinet Secretary, National Treasury
(Alternate Director– Humphrey Muhu)
National Social Security
Fund (NSSF) - (Represented by Dr. Anthony Omerikwa
Eng. Patrick N. Mwangi - Principal Secretary, State Department of
Investment and Industry, Ministry of Industry,
Trade and Cooperatives
(Alternate Director – Charles W. Mahinda)
COMPANY SECRETARY
Sheila Kahuki
Certified Public Secretary (Kenya)
P. O. Box 40101 - 00100
Nairobi
REGISTERED OFFICE
L R 337/113/1
Namanga Road, off Mombasa Road
P. O. Box 40101 - 00100
Nairobi
REGISTRARS
Haki Registrars
P. O. Box 40868 - 00100
Nairobi
BANKERS
KCB Bank Kenya Limited Standard Chartered Bank Kenya Limited
Moi Avenue Branch Kenyatta Avenue
P. O. Box 30081 - 00100 P. O. Box 30003 - 00100
Nairobi Nairobi
Citibank, N.A The Co-operative Bank of Kenya Limited
Citibank House P. O. Box 321 - 00204
P. O. Box 30711 -00100 Athi River
Nairobi
Stanbic Bank Limited Standard Chartered Bank Uganda Limited

Kimathi Street 5 Speke Road
P. O. Box 30550 -00100 P. O. Box 7111
Nairobi Kampala
Equity Bank Limited KCB Bank Uganda Limited

Kenyatta Avenue 6th Street Industrial Area
P. O. Box 104860 - 00100 P. O. Box 28568
Nairobi Kampala
PRINCIPAL AUDITOR
The Auditor General
Anniversary Towers
P. O. Box 30084 - 00100 GPO
Nairobi
DELEGATED AUDITORS
Deloitte & Touche
Certified Public Accountants (Kenya)
Deloitte Place, Waiyaki Way, Muthangari
P. O. Box 40092 - 00100 GPO
Nairobi
7
BOARD OF DIRECTORS
William Lay Henry Kiplagat Rotich EGH,

Chairman B.A. (Econ.), MA (Econ.), MPA,
Cabinet Secretary - The National Treasury, Kenya
He is a Kenyan citizen of American origin and holds a
bachelors degree from Alma College in the USA. He He served as the Head of Macroeconomics at the Treasury,
worked for General Motors International for 30 years Ministry of Finance in Kenya since March 2006. Under this
with postings in USA, Europe, Middle East and Africa. Mr capacity, he was involved in formulation of macroeconomic
Lay came to Kenya in 1989 where he served as Chairman policies that ensured an affordable and sustainable path
and CEO of General Motors East Africa until he retired in of public spending aimed at achieving the Government’s
2008. He held leadership positions in a number of private development priorities. In addition, he was also involved in
sector organizations; KEPSA, KAM, FKE AMCHAM and preparation of key budget documents including the Budget
the Kenya Chamber of Commerce. He is currently the Statements, as well as providing strategic coordination of
owner and Managing Director of Proscource Bimex Ltd, a structural reforms in the area of fiscal and financial sector.
Kenyan company engaged in the automotive, agricultural Mr. Rotich worked at the Research Department of the Central
and renewable energy sectors. He is also the Chairman of Bank of Kenya since 1994. From 2001 to 2004, he was attached
East Africa Portland Cement on appointment by H.E. Uhuru to the International Monetary Fund (IMF) local office in
Kenyatta. He is also actively involved in CSR/Charity work Nairobi to work as an economist. He has been the Chairman
with Junior Achievement and Mbugua Rosemary Foundation of Governing Council at East African Development Bank since
in supporting entrepreneurship. April 1, 2014 and its Member of Governing Council since May
16, 2013. He serves as a Governor at International Monetary
Fund. He serves as Member of the Board of Governors at
African Development Bank. He serves as a Director at East
African Portland Cement Company Limited. He serves as a
Non-Executive Director of National Bank of Kenya Ltd. He
serves as a Director at Safaricom Limited. He has been a
Director of Kenya Electricity Generating Company Limited
since January 15, 2014. He serves as an Independent Director
at Kenya Commercial Bank Limited. He serves as a Non
Executive Director of Kenya Reinsurance Corporation Ltd. He
serves as a Director of Telkom Kenya Limited and The Kenya
Power and Lighting Company Limited. Mr. Rotich served as a
Director at Mumias Sugar Company Limited until September
24, 2014. Mr. Rotich was a Director on several Boards of
State Corporations, including: Insurance Regulatory Board;
Industrial Development Bank; Communication Commission
of Kenya; and Kenya National Bureau of Statistics. Mr. Rotich
holds a Master’s Degree in Public Administration (MPA) from
the Harvard Kennedy School, Harvard University. Mr. Rotich
Prof. Sarone Ole Sena holds MA in Economics and a BA in Economics (First Class
Honours), both degrees from University of Nairobi.
He is a professor of strategic management and leadership
with ESAMI. He holds a PhD in Business Education and
Community Development. He has worked as a business
consultant for 20 years and is currently an independent
director of EAPCC, chairman of the staff pension scheme as
well as chairman of the HR committee.
8
BOARD OF DIRECTORS
Simon Peter Ole Nkeri Patrick Nduati Mwangi

Managing Director of East African Portland Cement Company Principal Secretary State Department of Investment and Industry
He is the Managing Director of East African Portland Cement He is the Principal Secretary, State Department of Investment
Company, having been appointed on 5th August 2016. and Industry in the Ministry of Industry, Trade and
He has previously worked at the National Social Security Cooperatives having been appointed in March 2017. Before
Fund (NSSF) as a General Manager for Operations and the latest appointment, he served as the Principal Secretary
with the Barclays Bank of Kenya as the Head of Planning & in the Ministry of Water and Irrigation from December 2015
Performance as well as the Head of Commercial Services for a to March 2017.
combined spell of seven (7) years. In 2003, he was the acting Mr. Patrick Mwangi has over 20 years of local and
Capital Market Authority (CMA) Chief Executive, having international work experience in the areas of Industrial
worked with the regulatory body for close to ten (10) years development; infrastructure and policy development; water
rising to the position of Head of Finance and Compliance. and sanitation sector; primary health; environmental health
Mr. Ole Nkeri has also had an illustrious working stint with an and Agriculture programs having worked in various positions.
International NGO, World Vision International, having started He served as a Senior Water Specialist at the World Bank
his working career at PricewaterhouseCoopers. Nairobi Office from February 2006 to December 2015. From
Immediately before taking over the Management of April 2004 to February 2006, he oversaw the management,
EAPCC, Mr Ole Nkeri was a special advisor on Strategy: coordination and development of the Africare Sierra Leone
Finance and Projects to the CS Industry, Trade and Co- Primary health, Environmental Health, Infrastructure and
operatives, Mr Adan Mohammed. He was also briefly the Agriculture programs with a consortium called CORAD of 4
Advisor for the Cabinet Secretary for Tourism and Commerce International Non-Government Organizations (CARE, CRS,
on Strategy, Finance and Economics. World Vision & Africare). He had previously undertaken
He was appointed by the Cabinet Secretary, National the same activities in Sierra Leone as the Coordinator IRC,
Treasury to be a member of the Disciplinary Committee of the an international NGO based in Liberia from August 2003
Institute of Certified Public Accountants for a period of three to March 2004. He has designed and constructed water
years with effect from April 1, 2016. This was after representing supply, sewerage and water reticulation systems in various
ICPAK at the National PPP Committee at the National countries including Uganda, Burundi, South Africa and East
Treasury for six (6) years. While at the PPP Committee, Mr. Timor. While serving in those countries, besides undertaking
Ole Nkeri was trained locally and internationally and is a Engineering projects in the Water and Sanitation Sector, he
Certified PPP Specialist, a Certified Regulation Specialist and developed Management Information Systems; Researched
a Certified Utility Management Specialist, having obtained on Water Costings and Tariffs; designed, negotiated and
these specialist trainings from the IP3 Institute of Washington implemented an integrated community water and sanitation
DC and Loughborough University (USA). program. He has also been involved in formulation of sub-
Mr Ole Nkeri is a holder of an MBA in International sector regulations, standards and guidelines; facilitated
Banking and Finance from the University of Birmingham capacity building, coordination, technology and research
(United Kingdom) after studying at the University of Nairobi development; Managed and reported several National
and Strathmore Business School. He is a beneficiary of the Projects and Programmes; and Developed and Sustained
British Chevening Scholarship for the University of Birmingham funds mobilization.
as well United States’ Hubert Humphrey Scholarship for He is a holder of an Msc in Water and Environmental
Boston University. Mr Ole Nkeri is an accomplished lawyer, Management from the University of Durban; a BSc in Civil
economist and accountant and an active Member of ICPAK, Engineering from the University of Nairobi; and a Degree in
LSK and ICPSK. Finance and Financial Law from the University of London. He
has also written four (4) publications focusing on the water
sector.
9
DIRECTORS’ PROFILES
Kungu Gatabaki Dr. Anthony Omerikwa

Acting Managing Trustee/CEO of
He holds an honors degree in economics from Legon the National Social Security Fund
University Ghana and post graduate in project management
and finance from Bradford University UK. A long experienced He is the Acting Managing Trustee/CEO of the National Social
corporate director of over 40 years, Mr Gatabaki has chaired Security Fund. Prior to his current position, he served as the
various boards of directors in Kenya and Africa including Acting General Manager Operations in the same institution
Housing Finance Group; Micro Africa, Jacaranda Hotels overseeing Information Technology, Human Resource,
and Kenya’s Capital Markets Authority. His other past Administration and Procurement.
directorships included the pan African Mortgage Institution He holds a Doctoral degree from the University
Shelter Afrique, African Reinsurance Corporation (SA) of Georgia, a specialist advanced degree in Workforce
Sudan Rural Development Company, Tanzania Development from Pittsburg State University, a Masters
Development Finance Co, Mumias Sugar Co; Kenya Safari of Science degree in Human Resource Development
Lodges and Hotels, Serena Hotels Group, Kenya Tea from Pittsburg State University, a Bachelor of Arts degree
Development Authority, Sony Sugar Company, Development in Economics and a diploma in IT at the Institute for the
Bank of Kenya. Management of Information Systems (UK).
Mr Gatabaki is currently a director of Grain Bulk Dr. Omerikwa is a member of the Institute of Human
Handlers in Kenya and Chairman of Letshego Kenya and Resource Management, Institute of Directors and the Kenya
Rwanda (both owned by the Pan African Letshego Holdings Institute of Management.
listed on Botswana Securities Exchange and operating in ten
countries in Africa.
Mr Gatabaki worked for 30 years with the Commonwealth
Development Corporation and Actis.
Sheila Kahuki
She is the Secretary to the Board of Directors and the
Company’s Legal Services Manager. She holds a Bachelor of
Laws degree (LL. B Hons) from the University of Nairobi and
a post graduate diploma in Law from the Kenya School of
Law. She is an advocate of the High Court of Kenya and a
Certified Public Secretary.
10
E A S T A F R I C A N P O R T L A N D C E M E N T C O M P A N Y L I M I T E D A N N U A LB U
R IELPDOI R
NTG 2T 0H1E6 /
N 2A0T1I 7O N
CHAIRMAN’S STATEMENT
It is my pleasure to present to you the Annual Report and Financial

Statements for the year ended 30 June 2017.
Economic Outlook
The world economy grew at 3.2% in 2016 and is projected to
be at 3.5% by close of 2017, attributed to modest recovery in
advanced economies, combined with declining inflation in both
advanced economies as well as several emerging economies
such as Brazil, India and Russia. GDP growth in Kenya was 5.8%
in 2016 marginally up from 5.7% in 2015. This is higher than
the Sub-Saharan growth rate of 1.6% but slightly lower than
the East African Community growth rate of 6.3%. The election
process in 2017 is expected to curtail the economic growth rate
further. Inflation declined by 0.3% to 6.3% largely attributable to
reduction in the cost of transportation, housing and utilities, and
communication. The Monetary Policy Committee of the Central
Bank of Kenya focused on achieving and maintaining stability in the
general price levels in the economy by lowering the Central Bank
Rate (CBR) twice in the period to close at 10%. This combined
with capping of interest rates to a maximum of 4% above CBR
rate in September 2016 resulted in a significant decline in interest
rates to 13.84% compared to 16.75% in a similar period in 2015.
The Kenya shilling depreciated against the US dollar to trade at
Kshs 103 to the dollar compared to Kshs 101 to the dollar the
previous year.
The building and construction sector posted a growth rate of 9.2%

in 2016, substantially down from 13.2% in 2015. The slowdown
of growth in the sector is directly attributable to increased
uncertainty over the general elections coupled with contraction
of credit advanced to the sector from Kshs 106.3 billion in 2015
to Kshs 104.8 billion in 2016. The Company will continue to use
its ownership structure to leverage against competitive pressure
while positioning itself to regain its market leadership and as
the key cement supplier for infrastructure projects. This will
be realised by working closely with the national Government
and key shareholders in order to turnaround the fortunes of
the Company.
International Trade
Kenya’s external trade position improved significantly as the
value of exports declined marginally while total imports
declined by 9.2%, which resulted in an improved
current account deficit of Kshs 853.7 billion in
2016 from Kshs 997 billion recorded in 2015. The
improvement was due to a lower import bill on
account of reduction in petroleum products, GDP growth in Kenya
enhanced earnings from tea and horticulture was 5.8% in 2016
and diaspora remittances. These helped
narrow the current account deficit thereby
marginally up from
offering support to the foreign exchange 5.7% in 2015.
market. During the financial year under review,
the Company re-entered the exports market WILLIAM LAY
by dispatching and selling products in Uganda, CHAIRMAN OF THE BOARD
OF DIRECTORS
Congo and their environs.
Investment Property Valuation

The investment property as detailed in note 21 has seen
amplified activity from trespassers who are increasingly
making it more difficult for the Company to carry out
11
CHAIRMAN’S STATEMENT Contd.
its normal operations. This invasion has therefore increased the The Company has implemented an EMS 140001 Environmental
security risk in the invaded area and also increased the cost of Management System which has impacted positively on energy
operations in the utilization of the land. The Company is seeking consumption.
the Government’s approval to unlock the value of its idle assets
to support implementation of its Medium Term Plan. To this end, Yen Denominated Loan
EAPCC is in structured discussions with the government on a special
The Company sought assistance from The National Treasury on
scheme that will allow the Government to secure the land for its
repayment of the Yen denominated loan, which will be fully repaid in
future projects and to purchase the land over an agreed period of
year 2020. The amount outstanding at the end of the financial year
time at an agreed price.
was 1,095 million Japanese Yen. Half of the loan has been hedged
in USD: JPY currency swap to minimize foreign exchange risk
Dividend
exposure. In the financial year under review, favourable exchange
The directors have not recommended a dividend in the current year. rate movements by the Yen offset adverse effects of the depreciation
of the shilling against the US dollar.
Our Focus
The focus of the Board remains singular; to steer the Company
back to sustainable profitability. Towards this end, a multi-pronged
Outlook
approach has been adopted that includes: Global growth in 2016 remained fairly stable at 3.2%, largely mirroring
• Capacity enhancement to increase cement production and global inflation which remained steady at 2.9% in the period.
packing capacity. The return of growth in the euro zone combined with impressive
• Cost reduction in all areas of operations, including increasing growth recorded in Asia offset deceleration by the US and China
production efficiencies and reducing administrative overheads. economies. Locally, uncertainty surrounding the general elections
resulted in depressed economic activity in the period. However, this
• Reducing finance costs, sourcing for cheaper funds for the did not severely affect the building and construction industry as the
remaining key priority projects and financial restructuring to domestic market grew by 4.6%. Infrastructure development projects
reduce the cost burden of existing debt. driven by both the national and county governments are expected
to supplement the current boom in real estate development in the
Taxation country. Investments in the construction industry are likely to remain
robust but challenges regarding tight liquidity remain. Regionally,
As a responsible corporate citizen, EAPCC continued to honor its tax
our markets in Uganda, Congo and Sudan continue to be served by
obligations and made payments in excess of Kshs 840 million in both
our Ugandan subsidiary that has depots in Kampala and Mbale and
direct and indirect taxes to the exchequer.
are expected to grow in line with the cement needs of the various
infrastructure projects earmarked in the coming year. In addition to
HIV/AIDS
the market opportunities noted above, the Company will address the
The Company is committed to undertake programmes and activities critical issue of competitiveness with a focus on improving efficiency,
that shall create awareness amongst staff and community, to embrace reducing costs and increasing market share and the Board will
positive behavior change so as to reduce the negative impact of continue to make Management accountable towards these goals in
the HIV pandemic on our society. We have strengthened the peer the near term.
educators team so that we can roll out our HIV/AIDS initiatives to
our suppliers and contractors. The Board
As I acknowledge the invaluable contribution made by the members
Corporate Governance
of the Board of Directors during the past year, we look forward to
The Company continues to believe in the importance of good their contribution in the foreseeable future.
governance and sees it as imperative to our business at all levels.
The Board of Directors is served by four Board Committees with
Appreciation
properly set out terms of reference. All the directors, except the
Managing Director, are independent, and meet regularly with the On behalf of the Board of Directors, I would like to extend my
senior management to review the effectiveness and appropriateness sincere thanks to the shareholders for their continued contribution
of the corporate strategy. The Board Charter in place contributes in and loyalty; the Board for its dedication and visionary leadership;
guiding the interaction between the Board and other stakeholders. to the National Government for its support and guidance; and to
All employees sign a code of conduct that guides the interaction Management for their tireless dedication to implementation of
amongst employees themselves and interaction with the other the company’s business plan. I also extend my gratitude to all our
stakeholders. business partners and customers for their continued loyalty and
support to the Blue Triangle brand.
Energy
Many Thanks.
During the financial year under review, the Kenya shilling depreciated
against the dollar. This effectively increased the cost of coal and
imported clinker. Cost of power increased from Kshs. Kshs. 12.00per
kWh to Kshs 12.20 per kWh due to reliance on thermal energy
occasioned by drought experienced in the region. Plans to engage WILLIAM LAY
KPLC to stabilize the supply of power bore fruit with a dedicated CHAIRMAN OF THE BOARD OF DIRECTORS
power line completed in the first quarter of financial year 2017/18.
12
MANAGING DIRECTOR’S
STATEMENT
Financial and Business Performance

This year’s performance was adversely impacted by the difficult
trading environment that was characterized by price competition,
high operating costs and uncertainty over the general elections.
The Company’s market share exhibited an upward trajectory in
the year while the cement market registered an overall growth of
10.4%.
Cement production for the Company declined by 16%

in the period owing to challenges of an ageing
plant. These challenges coupled with downward
pressure on retail prices due to excessive supply
impacted adversely on sales revenues, which
declined by 22%. The cost of energy increased The Company is in the
by 5% in the year driven by increase in coal process of initiating several
prices in the year. In order to increase Clinker
production, stabilize the Kiln’s run time and
projects that are expected
reduce maintenance costs, the Company to impact positively on
has invested in a number of equipment performance
whose installation before the end of the
S I M O N PE T E R O L E N K E R I
second quarter of the financial year 2017/18 MANAGING DIREC TOR
is expected to enhance productivity and market
competitiveness.
Selling and distribution costs reduced by 56% as a result

of a revamped distribution model aimed at lowering
fixed selling costs as well as concerted efforts to
ensure that the Company operates within its
means and to curtail unwarranted wastage. The
Company has revamped its distribution network
in strategic regional locations to cater for our
customer requirements. General administration
costs reduced by 4% driven by renewed cost
optimization measures. Other operating
expenses declined by 71% as a result of a one
off inventory adjustment charge incurred in
the financial year 2015/16. The operating loss
reduced by 17% to Kshs. 1.3 billion in the period
compared with 1.6 billion the previous year
due to renewed cost control measures initiated
during the period. The hedging strategy for
managing the foreign currency exchange risk
posed by the Japanese Yen denominated loan
performed reasonably well. The Kenya shilling
strengthened against the Japanese Yen but
weakened against the US dollar. This resulted in
a net foreign exchange gain of Kshs 134 Million,
compared to Kshs 306 Million foreign exchange
loss in the previous year.
The Company’s investment property, consisting

of two parcels of land in Athi River, has continued
to suffer from encumbrances by illegal squatters
who continue to pose a risk to realization of
value. The Company has continued in its pursuit
of legal eviction of the invaders and has created
public awareness of the illegality of the incursion
through the media. Notwithstanding these
challenges, the Company continues to restructure its
business processes for the purposes of eliminating
unwarranted wastage and reducing costs. To bring
13
MANAGING DIRECTOR’S STATEMENT Contd.
Cement
consumption went Overall growth Environmental
Management System 9.7 million
up from 5.7M tons of 10.4% (EMS) 14001:2004
tons
Certification and
in 2016 to 6.3M in the year. Transition to
14001:2015
tons in 2017.
the Company back to sustainable profitability, the Company is in iii. Achievement of higher revenue by June 2018.
the process of initiating several projects that are expected to impact iv. Achievement of an EBITDA of 3.2 billion by June 2018.
positively on performance going forward. These projects include the
installation of: To this end, the Company reviewed its sales walkthrough operations
to identify opportunities to increase efficiency. The Company
• A New Cement Mill 6 that will enhance cement has completed the development of a new ring road and a new
production weighbridge from the factory gate to the packing plant meant to
• New Pre-grinder for the existing Mill 5 to increase reduce the turnaround time.
performance of cement production; and
• Installation of a grate cooler retrofit into the existing The new customer access road has reduced the distance from the
Kiln line lorry park to the packing plant from the previous 3.2 km to 800
metres. This has significantly reduced the turnaround time to less
These measures will substantially reduce cooler reliability and thus than two hours. This project was implemented one year ahead of
improve kiln run factor. The Company is engaging with the national schedule and most importantly it was done at less than 10% of the
Government and other shareholders to design and implement the originally envisaged cost as incorporated in the MTP as prepared
requisite financing modalities for these key projects. two years ago.
Cement Market and Competition Through the MTP the Company is looking to:
Cement consumption in Kenya went up by 10.4% in 2016 from 5.7M • Delight its customers;
tons to 6.3M tons in 2017. The increased consumption is attributable • Grow the business;
to increased demand for residential and non-residential structures • Achieve operational excellence; and
in urban centers. This increased level of activity is also reflected • Develop talent that would enhance market
in the 7.6% increase in value of reported new private and public competitiveness.
buildings from 70.9 billion in 2015 to 76.2 billion in 2016. Entrance
of other players in the cement industry had the effect of increasing Financing Strategy
cement milling capacity to 9.7 million tons per annum from 9 million The Company is in consultations with the major stakeholders to seek
tons in the prior year. This beckoned further downward pressure innovative solutions to finance the realization of the medium term
on cement prices that is expected to remain unchanged in the plan. Successful realization of these engagements should enable the
near term. EAPCC’s market share remained stable and depicted an Company to reposition itself for future growth.
upward trajectory during the period, as the Company continues to
implement the Medium Term Plan with reviews on route to market Effectiveness and Efficiency
strategies with specific focus on achievement of greater market share
by June 2018. The industry is also expected to sustain the bullish The Company continues to undertake programs that ensure it
trend and support domestic growth due to ongoing infrastructure remains efficient and competitive in the carrying out of its activities.
projects and continued investment in residential and non-residential We will continue to reorganize for better effectiveness in the coming
assets by the private sector. year and we will improve on our efficiency within the business so
that overheads are kept under control whilst good governance and
Corporate Strategy compliance remain uncompromised. Investments aimed at renewing
the plant and making it more reliable and efficient and improve
The Company embarked on implementation of the 3 year Medium production include installation of a new clinker Cooler for the Kiln
Term Strategic Plan developed using the Balance Scorecard expected in the last quarter of 2017 and a new cement mill.
Framework. The main purpose of the Medium Term Strategic Plan
of 3 years was to fast track the achievements of specific milestones
supporting the turnaround of the Company, which include but are Quality Management Process
not limited to: We remain committed to customer satisfaction through manufacture
of high quality products. Complying with the requirements of ISO
i. Reduction of Turnaround time to 2 hrs by June 2018. 9001:2008 ensures that the organization not only retains its status
ii. Increase of sales volume by 2018.
14
as an ISO 9001:2008 certified organization but that continuous The Company has put in place whistle blowing mechanisms to
improvement, research & development and review of processes discourage corrupt and unethical practices among its employees.
is systematically done to ensure that our processes and strategies This process has been augmented by adding a facility to the website
remain current and relevant in the evolving business environment. where anonymous reporting can be done from anywhere in the
The Company is cognizant of the recent changes in quality world. The Company has also strengthened the capacity of the
management systems standards globally and has embarked on Integrity Assurance Office to conduct investigations and provide
the process of upgrading to ISO 9001:2015, while pursuing the capacity enhancement programs to all employees through anti-
integration of the Quality Management System (QMS 9001:2015) corruption training.
with the Environmental Management System (EMS 14001:2015) by
the first quarter of 2018. Corporate Social Responsibility
In the last financial year, the Company continued to contribute to the
Human Capital Training
improvement of education, health, water, economic empowerment
EAPCC trains its employees on a continuous basis to keep them up to and environmental conservation in keeping with the business focus
date with skills and enhance the Company’s efficiency. In this financial area of Community. A deliberate and concerted decision was made
year, trainings were undertaken across all cadres of employees to to focus on areas where the Company generates its raw materials.
ensure that identified training needs are addressed to develop skills This new focus and strategic decision ensures that the communities
relevant to the Company’s business. These trainings covered at least that live in areas where the Company operates in obtain substantial
30 different courses and subject areas. They included Behavioural benefits through CSR activities. All activities geared towards
Safety and Health Training, QMS Internal Auditors Training, benefiting the communities are identified directly by the communities
Defensive Driving Training, Customer Service Improvement and themselves through local committees.
Integrity Training. Employees are being trained to become trainers in
order to build on internal capacity for the future. Safety, Health and Environment
Environmental Commitment
Risk Management
East African Portland Cement Company has continually demonstrated
The Company’s operations and earnings are subject to various risks its commitment to improve its environmental performance
relating to the changing competitive economic, political, legal, social, through adoption of best manufacturing practices, implementing
industrial, business and financial conditions. These risks expose the international standards of environmental management, establishing
Company to real threats of financial and non financial loss. Some policies and programmes for conducting business operations in an
of these risks include credit risk, price risk, liquidity risk, foreign environmentally sound manner. Despite operating in a competitive
currency risk and interest rate risk. Given its regional operations, environment, we uphold environmental sustainability in all our
the Company is also faced with country risk. The Company’s overall operations.
risk management program focuses on the effective mitigation of
the various risks and seeks to minimize potential adverse effects Green Partnership Program
on corporate performance using a variety of techniques. These The Company has been at the forefront of supporting the local
include credit assessment and bank guarantees for the major community, employees and other interested parties in increasing
accounts receivables; price surveys in the market to confirm forest cover through issuance of free tree seedlings. This green
appropriateness of prices charged and/or paid, hedging of forex partnership program is in line with Kenya’s Constitution (Chapter
exposure, and review of foreign operations to adopt best business Five; article 69) which requires the state to work to achieve and
models or practices. The Company also takes a risk-based approach maintain a tree cover of at least ten per cent of the land area of
when designing, evaluating and monitoring its internal control Kenya.
environment. There are procedures designed to ensure business
objectives are realized and ensure business continuity in case of Environmental Management System (EMS) 14001:2004
process failures. Related requirements are set out in the Corporate Certification and Transition to 14001:2015
Risk Management Manual and Business Continuity Plan. The manual The Company has adopted Environmental Management System
describes the methodology to be followed to manage risks and the (EMS) implementation and certification. This has provided a
risk-based standards that provide a common approach to enterprise- systematic framework to manage the immediate and long term
wide risks. The Business Continuity Plan establishes alternatives to environmental aspects of our products, processes and services. EMS
normal processes in instances of process failures. The following will accelerate the momentum towards a low-carbon economy and
processes are used for the continuous monitoring and evaluation a more Sustainable Future by creating a framework for developing
of the Company’s risk management and Internal Control activities: concrete approaches to minimize environmental impacts, improve
• A structured process to identify and review risks to compliance with current and future statutory and regulatory
achieve corporate objectives requirements, increase leadership involvement and engagement
• A risk-based audit of the Company’s operations and of employees, improve Company reputation and the confidence of
systems stakeholders through strategic communication, achieve strategic
• A business control incidence reporting and provisioning business aims by incorporating environmental issues into business
process management, provide a competitive and financial advantage
• An ethics and compliance program. through improved efficiencies and reduced costs, encourage better
environmental performance of suppliers by integrating them into the
The established mechanisms allow the Board, through the Board organization’s business systems, speed deployment of new cleaner
Audit Committee, to regularly consider the overall effectiveness technologies, and enhance the Company’s response to the growing
of the internal control system and to perform a full annual review. impact of climate change.
15
The Company has begun the process of transiting from EMS relentless support accorded to Management by the Company’s Board
14001:2004 to 14001:2015 by June 2018. EMS 14001:2015 will of Directors, employees, customers, shareholders and communities
have a positive impact on environmental performance because that we work with during this tumultuous but difficult financial year.
it has greater focus on leadership and increases prominence of The future looks bright and together with all stakeholders, we can
environmental management within the organization’s strategic help to transform the oldest cement manufacturing Company in
planning processes and life cycle. Kenya and ensure that it regains its lost market share through the
consistent availability of the Blue Triangle Brand which is renowned
Future Outlook for its strength, durability and brightness.
The year has been characterised by protracted political wrangles
coupled with negative sentiments that do not promote a conducive
business environment. This has depressed economic activities God Bless You All.
as major investment decisions have been shelved until after the
elections. State projects (both national and devolved units) as well as
residential and commercial demand is expected to drive the cement
market in the near future as the country continues to improve its
infrastructure. This however depends on the Macroeconomic
environment that is expected to grow by 5.5% according to both
the World Bank and the IMF. Regrettably, continued capacity
expansion investments in the sector combined with potential new
market entrants signals downward pressure on prices in the long
term. Consequently, future competitive advantage will be predicated SIMON PETER OLE NKERI
against increased output, cost leadership and capacity utilization. MANAGING DIRECTOR
Let me take this golden opportunity to recognize and appreciate the
16
SUSTAINABILITY REPORT
EAPCC MD Simon Peter Ole Nkeri poses with the Kabini community after launch of renovation of the dining hall, classes and girls dormitory of
Kabini Primary School
East African Portland Cement Company (EAPCC) is gradually passes through the village for water, which is unsafe for drinking.
transitioning from traditional Corporate Social Responsibility to fully The Company has a Community Policing partnership with the
embrace the concept of Sustainability in its business operations, village which provides security along the perimeter wall. This has
taking into account the organization’s total impact upon both its reduced the Company’s losses incurred through looting of Company
immediate stakeholders, the society within which it operates and the property like Scrap Metal, Conveyor Belts, Gear Boxes and Spares
environment, while contributing to economic development. In the while boosting the security of the community as well.
last financial year, EAPCC intensified internal controls to improve the
integrity with which the Company governs itself, fulfills its mission,
lives by its values, engages with its stakeholders, measures its impacts
and publicly reports on its activities.
EAPCC’s managerial decision making increasingly takes into account

a wide range of criteria relating to the environmental and social
implications of business operations. We aim to achieve commercial
success in ways that honor ethical values and respect people,
communities, and the natural environment.
EAPCC’s sustainability pillars:

• Community Development and Economic Advancement
• The Environment
• Employees and the Workplace
Community Development and Economic Advancement

Athi River EAPCC Head of Financial Management, Mr Stephen K. Nthei (Far right)
presents a cheque of Sh 1,000,000 to the Athi River bursary committee
In the last financial year, the Company expanded its CSR programme
to support the education of needy children.
countrywide in keeping with the business focus area of Community.
A decision was made to give special attention to Athi River, Mavoko Earlier in the year, the Company donated One Hundred bags of
and Kitengela where the business is headquartered. Cement to House of Grace Church Athi River for the construction
of a Children’s centre. To boost education, the Company funded
In consultation with the Community and County administration, the Mavoko Secondary School Environment Club’s educational tour of
Company identified needy cases and issued school fee bursaries Mombasa. The Company was also the main sponsor of a Charity
for needy children which amounted to One Million Shillings Run organized in support of Bondeni Children’s Home in Athi River
(Ksh. 1M). The immediate and neighboring village of Kasuitu Town. Through the years, the Company has supported the local
also received fresh drinking water from the Company. This water Administration during celebration of National Holidays through cash
is used both domestically as well as in Kasuitu Primary School. and kind donations.
Before this intervention, the village relied on the seasonal river that
17
SUSTAINABILITY REPORT (Contd.)
Rift Valley and the Coastal Region

The Company supported education by providing cement to help
expand classrooms and schools. In Marakwet East, Cheptany
Primary School received 10 tonnes of cement for the construction of
6 classrooms. This support was provided to help the school recover
after a landslide swept away some classes and made it difficult for
normal learning to continue. In Kuresoi North, Tiloa Girls High
School received a 10 tonne donation as well to aid in the construction
of a laboratory and administration block. The school, located 30km
from Molo town, educates 42 needy girls, most of them orphans,
and is the only registered girls’ school in the entire Kuresoi North
constituency. The Naisula Lesuuda Peace Foundation also received
assistance from the Company to build a church in Suguta Marmar
in Samburu County to help spread the word of God and peaceful
coexistence in the area.
EAPCC MD, Simon Peter Ole Nkeri hands over a cheque of Ksh 250,000
to AIC Kajiado Childcare Center officials
The Company has provided bursaries in Kibini and Bissil worth one
million shillings each, and in Engirgirri (Kaputei North Ward) and
Enkurunga (Oloosirkon/Sholinke Ward) communities worth half a
million shillings each respectively. The Company has also renovated
a Boarding Primary School in Kibini and employed several teachers
in the school.
EAPCC Chairman of the Board of Directors, William Lay hands over a

cheque of Sh 500,000 to Maj. (Rtd.) Marsden Madoka for the annual
Madoka Half Marathon which is geared towards nurturing talent
among the youth in Taita Taveta County. Looking on is former Taita
Taveta Women Representative Ms Joyce Lay.
During the reporting period, Joyful Women Organization (JOYWO),

a self help group that advocates for financial independence of
women through table banking received a sponsorship of Ksh.
500,000 from the Company, while Ksh. 250,000 was donated to EAPCC MD hands over a dummy cheque of Sh 1 Million to the Oleleshua
Bursary Committee in Bissil to help needy students
Tesia Isanga Organization in support of the annual Madoka Half
Marathon that aims at identifying and nurturing talent among the Western Kenya and Mt Kenya region
youth in Taita Taveta County. The Company helped in the upgrade of Miguye Secondary School in
Kisumu through a timely cement donation. This is a young school,
Kajiado established in 2014, which needed support to build classrooms to
Kajiado County is the most important source of raw materials for the enrol needy students from marginalised areas in Nyanza province.
Company. During the reporting period, the Company maintained
6 boreholes in Kibini (Kenyewa/Poka Ward) by providing fuel In Meru, the Company donated cement to Meru Hospice. Meru
and paid bills for those connected with electricity. The Company Hospice is a charitable trust fund dedicated to reduce the suffering of
undertook repairs and normal servicing on all the six boreholes individuals with incurable diseases, especially cancer. The Company
while it continues to pay salaries for borehole attendants. reached out to the institution by donating cement to enable them
to construct a hospice resource center to alleviate the pain and
In its efforts to improve health, the Company has continued to suffering of terminally ill patients in Meru.
contribute towards improving access to quality and affordable
healthcare for the local community. The Company runs a static The Company will continue to support needy cases and causes
health facility at Oleleshua Community in Bissil (Matapato North through cement or cash donations in keeping with its philosophy of
Ward), where limestone is extracted. There is another clinic which is Holding Life Together.
based in Kibini where 60% of the limestone reserves are. The clinic is
open to access by the local community for First Aid and basic health
The Environment
services. There is a 24 hour ambulance which operates within the
area and offers its services to our employees based at the quarry and EAPCC remains fully committed to embracing even more innovative
also the local community. ways to conserve and restore the environment in its theater of
18
SUSTAINABILITY REPORT (Contd.)
operations and the country at large. The Company consistently takes impacts; improve compliance with current and future
measures to conserve and improve the environment. statutory and regulatory requirements; increase leadership
involvement and engagement of employees; improve
The EAPCC family is fully aware that it cannot fulfill its mission of Company reputation and the confidence of stakeholders
transforming lives through production and delivery of Quality through strategic communication, achieve strategic business
Cement and Cement products from the plant to the customer if they aims by incorporating environmental issues into business
do not attach a high premium on matters environment. management; provide a competitive and financial advantage
through improved efficiencies and reduced costs; encourage
better environmental performance of suppliers by integrating
them into the organization’s business systems; speed
deployment of new cleaner technologies, and enhance the
Company’s response to the growing impact of climate change.
• The Company has begun the process of transiting from EMS
14001:2004 to 14001:2015 by June 2018. EMS 14001:2015
will have a positive impact on environmental performance
because it has greater focus on leadership and increases
prominence of environmental management within the
organization’s strategic planning processes and lifecycle.
Employees and the Workplace

EAPCC is an OHSAS certified cement Company. OHSAS stands
for Occupational Health and Safety Assessment Series which is
EAPCC Shareholders join hands to plant a tree at the Shareholders
corner at the Factory in Athi River after a tour of the plant. implemented by the British Safety Council. This is in addition to the
National Safety Act which the Company complies with. In the last
Today, millions of people, the majority of whom are in Africa, are financial year, the Company reported a significant improvement in
facing environmental issues that adversely affect their lives. EAPCC safety by well over 50 percent as reported by auditors who check for
has over the years sensitized employees on the need to conserve compliance.
the environment, plant trees and advocated on the prudent use
of natural resources not only within the Company but also in their
homes. By doing this, the Company is supporting Article 42 of the
Constitution that provides that every person has a right to a clean
and healthy environment. The Company endeavors to protect the
environment and ensure ecologically sustainable development and
the prudent use of natural resources.
In order to ensure sustained compliance with environmental

regulatory requirements, the Company undertook the following
compliance projects during the financial year:
• Annual Environmental audit;
• Air Quality Assessment;
• Water quality and effluent analysis; and
• Noise survey
EAPCC colleagues report to duty fully donned with the safety gear in
Green Partnership Program compliance with OSHAS standards
• The Company has been at the forefront in supporting the
local community, employees and other interested parties In the last financial year EAPCC attained zero fatalities in all Company
in increasing the forest cover through issuance of free tree operations. It strengthened its success in managing safety and
seedlings. This green partnership program is in line with health through increasing the level of management and employee
Kenya’s Constitution Chapter Five; Article 69 that requires the involvement in safety awareness, promotion of safe working
state to work to achieve and maintain a tree cover of at least procedures and the reporting of hazards in the work place.
ten per cent of the land area of Kenya.
The Company maintains ambulances at all plant sites. There are
Environmental Management System (EMS) 14001:2004 also Company clinics at Athi River, Kibini and and Bissil with a clear
Certification and Transition to 14001:2015 partnership with local medical and emergency facilities for purposes
• The Company has adopted Environmental Management of quick management of casualties in the event of an emergency.
System (EMS) implementation and certification. This has
provided a systematic framework to manage the immediate Training
and long term environmental aspects of the products, EAPCC trains its employees on a continuous basis to keep them up
processes and services offered by EAPCC. EMS will to date with skills and enhance the Company’s efficiency. In the last
accelerate the momentum towards a low-carbon economy financial year, employees received training in Quality Management
and a more Sustainable Future by creating a framework for Systems as well as culture change training.
developing concrete approaches to minimize environmental
19
20
CORPORATE GOVERNANCE STATEMENT
Introduction Public Secretaries of Kenya. She supports the Board on procedural

The Company continues to uphold high standards of corporate and regulatory matters while ensuring the Company adheres to the
governance in order to enhance and protect value and ensure Board policies and procedures.
the sustainability of the business. The Board of Directors seeks to The following table shows the number of Board meetings held
discharge its duties and responsibilities in the best interests of the during the year and the attendance of individual directors.
Company, its shareholders, customers, suppliers, financiers, the
Government and the wider community. Director Board Board 82nd
(scheduled) (Special) AGM
Compliance statement
Chairman 4 8 1
The Company is guided by the Capital Markets Authority Guidelines
on Code of Corporate Governance Practices for Issuers of Securities Managing Director 4 5 1
to the Public 2015, the Public Officer Ethics Act, 2003, other laws CS Treasury or his 4 6 1
relevant to its operations, the ‘Mwongozo’ Code of Governance for alternate
State Corporations and other best practice principles as contained
PS Ministry of Industry, 4 4 1
in the Board Charter.
Trade & Co-operatives
Responsibilities of the Board NSSF 4 7 1

The primary role of the Board is to provide leadership and strategic Kungu Gatabaki 4 7 1
direction to the Company to enhance shareholder value. Its main Professor Sarone ole 3 3 -
responsibilities are the establishment of strategy and general policy, Sena
ensuring preparation of statutory financial statements, reviewing
Company Secretary 4 8 1
and monitoring the performance of the Company and of senior

Management and ensuring that there are adequate internal controls
During the year, sixteen (16) Board meetings were held. The Board
to ensure business continuity. The Board has delegated authority for
found it necessary to increase the number of special meetings
the conduct of day to day business to the Managing Director and the
in order to enhance supervision of the Company in view of the
Management Committee. The Board of Directors has access to the
declining performance.
Company Secretary as well as timely and relevant information from
Management to discharge its duties effectively. Directors are also
The Board is of the opinion that there is a balance between
empowered to seek independent professional advice on Company
independent executive and non-executive directors as required by
affairs at its expense where necessary.
the Code of Corporate Governance Practices for Issuers of Securities
to the Public, 2015.
The Composition of the Board is set out on page 7.
Delegation of Authority
The Board is made up of the Chairman, Managing Director
and four non-executive directors. The non-executive directors
Board Sub Committees
are independent of management and are subject to periodic
The Board has four Sub Committees with specific delegated
re-appointment in accordance with the Company’s Articles of
authorities. These are the Audit, Finance, Technical and the
Association. On appointment, the directors receive an induction
Human Resources Committee & Remuneration Committees while
covering the company’s business and operations. The directors are
Management has an Executive Management Committee
advised of the legal, regulatory and other obligations of a director
of a listed company. The directors’ responsibilities are set out in the
The Board Committees assist the Board in discharging its
Statement of Directors Responsibilities on page 29.
responsibilities. The Committees have clear defined roles and terms
of reference that have been approved by the Board. The Committees
The Board meets regularly and directors receive appropriate and
are chaired by non-executive directors.
timely information so that they can maintain full and effective control
over strategic, financial, operational, compliance and governance
Details of these committees and membership are shown below.
issues.
Audit Committee
The roles of the Chairman and the Managing Director are clearly
The Committee reviews quarterly, half year and annual financial
defined and have been approved by the Board.
statements, external audit plans, audit findings, internal audit and
operations and findings and risks affecting the Company. External
The Board members have a wide range of skills and experience and
auditors have unrestricted access to the Managing Director and
each brings an independent judgment and considerable knowledge
Chairman of Audit Committee.
to the Board discussions. The Board recognizes that at the core
of the corporate governance system, it is ultimately accountable
The members of the Committee are:
and responsible for the performance and affairs of the Company.
Towards this end, the directors in fulfilment of their fiduciary duty
Anthony Omerikwa (representing NSSF) Chairman
act always in the best interest of the Company and shareholders.
Kungu Gatabaki
The Board understands the significance of corporate governance
CS, Treasury
and continuously strives to provide competitive strategic leadership.
Prof. Sarone ole Sena
S Kahuki Secretary
The Company Secretary is a member of the Institute of Certified
21
CORPORATE GOVERNANCE STATEMENT (Contd.)
The Committee held five (5) meetings during the year. The table below shows the number of committee meetings held
during the year and attendance by individual directors.
*Experts and business representatives are invited on a need-basis.
Director Audit Finance HR &
Remuneration
Board Technical Committee
The Committee reviews the Company’s capital expenditure plans, Number of meetings
Sales and Marketing strategies, Technology and Research. CS Treasury / Alternate 5 1 -
PS Ministry of Industry, - 1 3
The members of the Committee are:
Trade & Co-operatives
PS Ministry of Industry, Trade & Co-operatives Chairman
Anthony Omerikwa Representing NSSF 5 1 3
NSSF MD - 1 3
Kungu Gatabaki Managing Director Kungu Gatabaki 5 1 -
S. Kahuki Secretary
Prof. Sarone ole Sena 4 - 3
The Committee has four scheduled meetings each year and receives Company Secretary 5 1 3
reports on all aspects of technical operations of the Company.
During the year the Committee’s meetings were suspended and the
agenda included in the full Board meetings. Management Committee
The Management Committee is the link between the Board and
*Experts and business representatives are invited on a need-basis. Management. The Committee assists the Managing Director in giving
overall direction to the business. The Committee is responsible for
Board Human Resources & Remuneration Committee the implementation of operational plans and the annual budgets. It
The Committee is responsible for the formulation and review of the is also responsible for the periodic review of operations, strategic
human resource policies and organisation structure, appointment plans, proposals, identification and management of key risk and
of and terms of conditions of senior management, promotion and opportunities. The Committee also reviews and approves guidelines
disciplinary matters relating to senior staff, the remuneration and for employees’ remuneration.
benefits structure and approval of performance based rewards.
The Committee meets at least once a week.
The Members of the Committee are:
Prof. Sarone ole Sena Chairman Directors’ shareholding
Anthony Omerikwa Representing No member of the Board holds shares in his or her personal capacity
NSSF that exceeds 1% of the total shareholding of the Company.
PS Ministry of Industry, Trade & Co-operatives
Managing Director Directors’ remuneration and loans
S Kahuki Secretary The remuneration of all directors is subject to regular review
to ensure that levels of remuneration and compensation are
The Committee has four scheduled meetings during the year. During appropriate. Neither at the end of the financial year, nor at any
the year three (3) meetings were held. time during the year did there exist any arrangement to which the
Company is a party, whereby directors might get benefits by means
Finance Committee of acquisition of the Company’s shares. Information on aggregate
The Board constituted the Committee on 22 February 2017 in order amount of emoluments and fees paid to directors are disclosed in
to enhance supervision of the finance and financing activities of note 27 of the financial statements.
the Company. The Committee is responsible for recommending
financial policies, goals, and budgets that support the mission, Board Performance Evaluation
values, and strategic goals of the Company. It also reviews the Under the guidelines of Performance Contracting and the Board
Company’s financial performance against its goals and proposes Charter, the Board is responsible for ensuring that a rigorous
major transactions and programs to the Board. evaluation is carried out of its performance, and that of its committees
The members of the Committee are: and individual directors. The evaluation of Performance Contracting
is conducted quarterly and annually and the results of the evaluation
Kungu Gatabaki Chairman are provided to the Ministry of Industrialization and Office of the
CS, Treasury President as required under Performance Contracting.
PS Ministry of Industry, Trade & Co-operatives
Anthony Omerikwa Representing Going concern
NSSF The Board confirms that it is satisfied that the Company has adequate
Managing Director resources to continue in business for the foreseeable future. For this
S Kahuki Secretary reason, the Company continues to adopt the going concern basis
when preparing the financial statements.
The Committee held one (1) meeting during the year
22
CORPORATE GOVERNANCE STATEMENT (Contd.)
Internal controls Skills and experience of the Board

The Board has a collective responsibility for the establishment and Our Directors have among other attributes the following skills and
maintenance of a system of internal control that provides reasonable experience.
assurance of effective and efficient operations. However, it recognizes
that any system of internal control can provide only reasonable and Corporate governance and legal knowledge Diverse age profiles
not absolute assurance against material misstatement or loss. Cement industry experience Diverse and Complementary skills
The Board attaches great importance to maintaining a strong control
environment and the company’s system of internal controls includes Code of Conduct
the assessment of non financial risks and controls. The Board has The Board has approved a Code of Ethics, which sets out the
reviewed the Company’s internal control policies and procedures Company’s core values relating to the lawful and ethical conduct of
and is satisfied that appropriate procedures are in place. business.
The Company’s business is conducted within a developed control Conflict of Interest

framework, underpinned by policy statements, written procedures All directors are under duty to avoid conflict of interest. This entails
and control manuals. This ensures that there are written policies and not engaging, directly or indirectly in any business that competes
procedures to identify and manage risk including operational risk, or conflicts with the Company’s business. Any potential or actual
liquidity risk, regulatory risk, legal risk, reputational risk, market risk conflicts of interest are promptly reported to the Company Secretary.
and credit risk. The Board has established a management structure,
which clearly defines roles, responsibilities and reporting lines. Appointments to the Board
Delegated authorities are documented and communicated. Directors retire by rotation annually, and, if eligible, their names are
submitted for re-election at the annual general meetings.
The performance of the Company is reported regularly to its
management and the Board. Performance trends, forecasts as well All director appointments are subject to confirmation by shareholders
as actual performance against budgets and prior periods are closely at the annual general meetings. In addition to the induction program
monitored. Financial information is prepared using appropriate for new directors, there are specific training workshops that
accounting policies, which are applied consistently. Operational directors participate that are accredited by the Centre for Corporate
procedures and controls have been established to facilitate complete, Governance.
accurate and timely processing of transactions and the safeguarding
of assets. These controls also include the segregation of duties, the Interaction with Management
regular reconciliation of accounts and the valuation of assets and The EAPCC Board has a high level of regular interaction with
positions. management thereby enabling directors to infuse their considerable
experience, professional knowledge of the target market into
All employees have a copy of the Code of Ethics and are expected the strategic direction. There is a policy of open communication
to observe high standards of integrity and fair dealing in relation between Board and Management and this ensures that the Board is
to customers, staff and regulators in the communities in which the fully informed of major matters concerning EAPCC and its business.
Company operates. This forms part of the Company’s compliance There is a procedure which allows for directors to suggest additional
structure, which sets policies and standards for compliance with items for discussion at meetings and to call for additional information
rules, regulations and legal requirements. or a briefing on any topic prior to the meeting.
The Board will continue to play its role effectively under the corporate During the year 2016/2017, the membership of the Board
governance structure. The non-executive directors will maintain Committees was reviewed in line with the requirements of the Board
oversight on management of the Company through Board meetings charter which provides that committee memberships and chairs be
as well as various Board Committees. reviewed annually.
Relations with shareholders Communication

The Board recognizes the importance of good communications with The Board is satisfied that decision – making capability and the
all shareholders. The Annual General Meeting (AGM) as well as the accuracy of its reporting and financial results are maintained at a high
published annual report are used as the opportunity to communicate level at all times to ensure adequate disclosure and transparency. The
with shareholders. The Company gives shareholders adequate Board relies on the external Group of Auditors and Audit Committee
notice of the AGM as provided for in the Kenyan Companies Act and to raise any issues of financial concern.
shareholders are encouraged to submit questions and also appoint
proxies to represent them where they are unable to attend. Ad hoc
shareholder requests for information are handled on an on-going The Company provides timely and appropriate information
basis and also during the AGM. to shareholders through publication of periodic accounts and
the Annual Report and holds an annual face-to-face briefing.
In upholding and protecting shareholders’ rights, the Board Shareholders are also advised of all important events that impact the
recognizes that every shareholder has a right to participate and Company’s operation.
vote at the general shareholders’ meeting. The Board also allows
shareholders to seek clarity on the Company’s performance in
general meetings.
23
24
R E P O RT O F T H E D I R E C TO R S
FO R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 7
The Directors present their report together with the audited financial statements of The East African Portland Cement Company Limited
(“the company”) and its subsidiary (together, “the Group”) for the year ended 30 June 2017 which show their state of affairs.
PRINCIPAL ACTIVITY
The principal activity of the parent company is the manufacture and sale of cement.
The principal activity of the company’s wholly owned subsidiary, East African Portland Cement Uganda Limited, is the sale of cement
purchased from the parent company.
GROUP FINANCIAL RESULTS

2017
Sh’000
Loss before taxation (1,712,903)
Taxation credit 241,542
Loss for the year charged to retained earnings (1,471,361)
DIVIDENDS
The directors do not recommend the payment of a dividend in respect of the current year (2016: KShs nil).
DIRECTORS
The present directors are shown on page 7. The following changes have taken place since 1 July 2016:
Eng. Patrick Nduati Mwangi was appointed to the Board of Directors on 30 March 2017 and Mr. Julius Korir retired from the Board of
Directors on the same date.
25
R E P O RT O F T H E D I R E C TO R S
FO R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 7 ( C o n t d . )
ENHANCED BUSINESS REVIEW

Financial Performance
The performance of the business was impacted adversely by a number of factors in the year. The gross profit margin dropped from 18%
in 2016 to 11% in 2017. Increased competitive pressure coupled with excess supply against demand led to downward movement in prices
thus constraining net revenue. Increases in prices of key inputs further dampened the margins. The operating loss ratio increased marginally
to -19% up from -18% in 2016. Despite the significant drop in gross profit, concerted efforts to manage the costs led to only a marginal
worsening of the loss from operations ratio. Earnings per share decreased to Kshs -16.35 in 2017 down from Kshs 46.06 in 2016. The EPS
in 2016 was driven largely by fair value gains from the investment properties. There were no significant gains in investment property in 2017
due to stabilization of the property values in relation to the properties in question after completion of the Standard Gauge Railway in the
vicinity. The total assets of the company decreased marginally from Kshs 27,842 million in 2016 to Kshs 27,357 million in 2017 mainly due
to depreciation.
Risk Management
The company and group face a number of risks that are likely to affect the performance of the company if not appropriately and timely
mitigated. The continued oversupply of cement in the domestic market and increase in the number of cement players adopting price entry
strategy continue to impact on downward pressure on price and thus profitability of the business. The increasing competition also affects the
credit risk as more players seek to gain market share through credit incentives. These factors combine to adversely impact on the liquidity risk
of the business. Investment in capacity expansion and efficiency remain a major risk in countering the impact of new entrants. Management
has developed an elaborate risk management programme to manage the current and future risks that threaten the business.
The Environment
The company is actively involved in afforestation initiatives through issue of seedlings to the local community. The company has also complied
with NEMA requirements including the recent installation of dust emission system. The company is certified for both environment and safety
management systems being EMS 14001:2004 and OHSAS 18001:2007 respectively.
Human Capital
The company values the contribution employees put towards realization of corporate objectives and enhancement of shareholder value.
The company seeks to empower its employees through carefully targeted training and development programs. The Company technical team
obtains diverse knowledge transfer from suppliers of critical installations in the factory.
Corporate social responsibility

The company is strongly involved in community issues as detailed in the corporate social responsibility report as a corporate citizen focused
to returning value to the partnering communities.
Future outlook
The construction sector in the region is expected to continue on an upward trend. The expected infrastructural developments driven by
both county and national governments will continue to drive growth in this sector. Downward pressure on prices is expected to continue as
the existing plants continue to expand and using price as a penetration strategy. Cost leadership and innovation will be the main drivers of
competitiveness and success in the future. The company is positioning itself to advance in these areas of competence.
Investment property
Included in the financial statements are leasehold properties that no longer hold any mining materials. As indicated in Note 20, there are
4,121 acres of land recorded at cost but whose market value has been independently and professionally placed at Kshs. 10.8 billion. The
Board of Directors will liaise with the external auditors with a view to transferring the 4,121 acres of fully mined parcels of land from leasehold
property to investment property. Thereafter the Company will seek for the relevant National Government approval on the best usage of this
land and others hitherto recorded as investment property that have been fully mined in a bid to facilitate refinancing of the Company so as
to turn its fortunes and to create value for the shareholders of the Company.
DISCLOSURE OF INFORMATION TO AUDITORS

Each Director confirms that, so far as he is aware, there is no relevant audit information of which the Corporation’s auditors are unaware and
that each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information
and to establish that the Corporation’s auditors are aware of that information.
AUDITORS
The Auditor General is responsible for the statutory audit of the Company’s books of account in accordance with Section 35 of the Public
Audit Act, 2015. Section 23(1) of the Act empowers the Auditor General to appoint other auditors to carry out the audit on his behalf.
Accordingly, Deloitte & Touche were appointed to carry out the audit for the year ended 30 June 2017 and report to the Auditor General.
By Order of the Board
SHEILA KAHUKI
COMPANY SECRETARY
Nairobi
2017
26
D I R E C TO R S R E M U N E R AT I O N R E P O RT
The Board of Directors congratulates the dedicated investors for the gallant support accorded to the Company in the just completed financial
year. The business environment for the company was harder than previous years due to a number of factors, both internal and external.
As a result the group turnover dipped by 22% compared to previous year. However the company controlled the expenses to ensure better
cost efficiency than previous year. Due to the challenges faced and the need to consistently design responsive mitigating actions, the Board
of Directors undertook various activities on behalf of the Company which led to an increase in Directors emoluments by 23% from last year.
THE DIRECTOR’S REMUNERATION POLICY AT A GLANCE

Executive Directors
The Managing Director is the only Executive Director of the Company within the confines of the Company’s act. His remuneration is in
accordance with the staff remuneration policy and approved by the Board of Directors. His remuneration package comprises a basic salary,
gratuity and other benefits designed to recognize his skills, experience and attention required to run the Company.
Non-Executive Directors
Non-Executive Directors receive fees and other emoluments in recognition of their contribution to the Company for Board and Committee
meetings. The fees are approved by Shareholders at Annual General Meetings and is payable after the occurrence of the meetings. The Non-
Executive Directors do not receive any performance-based remuneration. No pension contributions are payable on their emoluments. The
Company reimburses travel and accommodation expenses related to attendance at Board meetings.
Directors’ shareholding
No member of the Board holds shares in his or her personal capacity in the Company. However, the directorships mirror representation of
key shareholders of the Company. The National Treasury is represented by the Cabinet secretary with a nominated alternate while the parent
ministry is represented by the Principal Secretary with a nominated alternate. The national Social Security Fund as a director is represented
by the Managing Trustee with a nominated alternate.
There will be no changes to these policies in the next financial year.
Directors Contract of service

The tenures of the directors in office at the end of the last financial year are tabulated below.
DIRECTORS CONTRACT OF SERVICE

DIRECTOR START OF CONTRACT END OF CONTRACT NOTICE PERIOD PAYABLE
William Lay 16 November 2014 16 November 2017 Not Applicable Not Applicable
Simon Peter Ole Nkeri 05 August 2016 04 August 2019 6 Months Six months in Lieu
Kungu Gatabaki Shareholder rep Shareholder rep Not Applicable Not Applicable
Prof. Sarone Ole Sena Shareholder rep Shareholder rep Not Applicable Not Applicable
Henry Rotich Shareholder rep Shareholder rep Not Applicable Not Applicable
National Social Security Fund Shareholder rep Shareholder rep Not Applicable Not Applicable
Eng. Patrick Nduati Parent ministry Parent ministry Not Applicable Not Applicable

In the previous Annual general meeting shareholders voted for the adoption of the Director’s remuneration through proposal and secondment
on the floor of the AGM. The remuneration policy was not on the agenda for discussion hence was not voted for given that there was no
anticipated change except the routine approval of the Directors remuneration in the financial year.
The remuneration paid to directors in the year under review and the prior year is summarized in the table below.
27
D I R E C TO R S R E M U N E R AT I O N R E P O RT C o n t d .
DIRECTORS RENUMERATION FOR THE YEAR 2016/17

COMPENSATION
SALARY ALLOWANCES BONUSES FEES ON FOR LOSS TOTAL
DIRECTOR Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 OF OFFICE Kshs ‘000
Kephar Tande 1,215 11,390 - - 12,838 25,443

Simon Peter Ole Nkeri 10,980 2,106 - - - 13,086
William Lay - 3,108 - 300 - 3,408
Kungu Gatabaki - 1,174 - 160 - 1,334
Anthony Omerikwa - 1,114 - 160 - 1,274
Prof. Sarone Ole Sena - 956 - 160 - 1,116
Jackson Kinyanjui - 600 - 160 - 760
Humprey Muhu - 716 - - - 716
Julius Korir Kiplangat - 510 - 160 - 670
Charles Mahinda - 300 - - - 300
Moses Cheseto - 86 - - - 86
Patrick Mwangi Nduati - 86 - - - 86
Chris Kiptoo - 43 - - - 43
Total 12,195 22,189 - 1,100 12,838 48,322
The allowances and salaries for the executive directors is reflected in the statements under note 13 and note 15.
DIRECTORS RENUMERATION FOR THE YEAR 2015/16

COMPENSATION
SALARY ALLOWANCES BONUSES FEES ON FOR LOSS TOTAL
DIRECTOR Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000 OF OFFICE Kshs ‘000
Kephar Tande 14,580 2,280 - - - 16,860

Anthony Omerikwa - 986 - 160 - 1,146
Moses Cheseto - 129 - - - 129
Kungu Gatabaki - 563 - 160 - 723
Humprey Muhu - 43 - - - 43
Julius Korir Kiplangat - 300 - 160 - 460
Jackson Kinyanjui - 471 - 160 - 631
Wilson Songa - 86 - - - 86
Prof. Sarone Ole Sena - 900 - 160 - 1,060
David Komen - 165 - - - 165
William Lay - 2,201 - 208 - 2,409
Total 14,580 8,124 - 1,008 - 23,712
The remuneration of all directors is subject to regular review to ensure that levels of remuneration and compensation are appropriate.
Neither at the end of the financial year, nor at any time during the year did there exist any arrangement to which the Company is a party,
whereby Directors might get benefits by means of acquisition of the Company’s shares. Information on aggregate amount of emoluments
and fees paid to directors are disclosed in note 27 of the financial statements.
COMPANY SECRETARY
2017
28
STAT E M E N T O F D I R EC TO R S ’ R ES P O N S I B I L I T I ES
The Kenyan Companies Act, 2015 requires the directors to prepare financial statements for each financial year that give a true and fair
view of the financial position of the Group and Company as at the end of the financial year and of their profit or loss for that year. It also
requires the directors to ensure that the Group and Company maintain proper accounting records that are sufficient to show and explain the
transactions of the Group and Company and disclose, with reasonable accuracy, their financial position. The directors are also responsible
for safeguarding the assets of the company, and for taking reasonable steps for the prevention and detection of fraud and error.
The directors accept responsibility for the preparation and presentation of these financial statements in accordance with the International
Financial Reporting Standards and in the manner required by the Kenyan Companies Act. They also accept responsibility for:
i. designing, implementing and maintaining such internal control as they determine necessary to enable the presentation of financial
statements that are free from material misstatement, whether due to fraud or error;
ii. selecting suitable accounting policies and applying them consistently; and

iii. making accounting estimates and judgments that are reasonable in the circumstances.
The directors are aware of the negative working capital position and the recurring losses from operations as disclosed in note 2 to the
financial statements. The directors acknowledge that the continued existence of the Group and Company as a going concern depends on
the measures that the directors will put in place to return the company to profitable operations. The directors are therefore of the view that
the company will remain a going concern for at least the next twelve months from the date of this report.
The directors acknowledge that the independent audit of the financial statements does not relieve them of their responsibilities.
Approved by the board of directors on 2017 and signed on its behalf by:
WILLIAM LAY SIMON PETER OLE NKERI

DIRECTOR DIRECTOR
29
R E P O RT O F T H E A U D I TO R G E N E R A L
42 88
30
R E P O RT O F T H E A U D I TO R G E N E R A L C o n t d .
31
32
33
34
35
36
11 16
27 28
37
38
Chemususu Dam
E L DA M A R AV I N E
BARINGO COUNTY
39
Infrastructure is much more

important than architecture
R e m Ko o l h aas
40
FINANCIAL
STATEMENTS
41
CONSOLIDATED AND COMPANY STATEMENTS OF PROFIT

OR LOSS AND OTHER COMPREHENSIVE INCOME
FO R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 7
GROUP COMPANY
Note 2017 2016 2017 2016
Kshs’000 Kshs’000 Kshs’000 Kshs’000
REVENUE 5 6,928,307 8,871,456 6,923,749 8,822,902
COST OF SALES 6 (6,165,496) (7,283,948) (6,163,025) (7,259,108)
GROSS PROFIT 762,811 1,587,508 760,724 1,563,794
Other operating income 7 21,527 78,768 21,527 78,768
Inventory provisions written back 183,277 - 183,277 -
967,615 1,666,276 965,528 1,642,562
EXPENSES
Selling and distribution 8 (131,068) (297,734) (140,265) (282,659)
Administration and establishment 9 (1,857,343) (1,937,310) (1,841,134) (1,922,736)
Other operating expenses 10 (295,487) (1,015,803) (261,945) (982,636)
(2,283,898) (3,250,847) (2,243,344) (3,188,031)
LOSS FROM OPERATIONS (1,316,283) (1,584,571) (1,277,816) (1,545,469)
INTEREST INCOME 11 2,136 4,357 2,070 4,208
FINANCE COSTS 12 (617,017) (618,125) (617,017) (618,125)
EXCHANGE GAIN/(LOSS) ON
FOREIGN CURRENCY LOAN 14 134,018 (305,706) 134,018 (305,706)
FAIR VALUE GAIN ON
INVESTMENT PROPERTY 21 84,243 6,238,797 84,243 6,238,797
(LOSS)/PROFIT BEFORE
TAXATION 13 (1,712,903) 3,734,752 (1,674,502) 3,773,705
TAXATION CREDIT 16(a) 241,542 411,003 241,542 411,003
(LOSS)/PROFIT FOR THE YEAR (1,471,361) 4,145,755 (1,432,960) 4,184,708
OTHER COMPREHENSIVE INCOME

Items that will not be reclassified
subsequently to profit or loss:
Revaluation surplus 572,793 - 572,793 -
Deferred tax on revaluation of property, plant &
equipment (171,838) (171,838) -
400,955 400,955
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operation 14,629 (8,588) - -
TOTAL OTHER COMPREHENSIVE INCOME 415,584 (8,588) 400,955 -
TOTAL COMPREHENSIVE
(LOSS)/INCOME FOR THE YEAR (1,055,777) 4,137,167 (1,032,005) 4,184,708
(LOSS)/EARNINGS PER SHARE
- Basic and diluted (Kshs) 17 (16.35) 46.06 (15.92) 46.50
42
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

A S AT 3 0 J U N E 2 0 1 7
GROUP COMPANY
Note 2017 2016 2017 2016
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 18(a) 8,352,683 8,464,905 8,352,711 8,462,691
Capital work- in- progress 19 184,232 178,973 184,232 178,973
Prepaid operating leases 20 9,116 9,221 9,116 9,221
Investment properties 21 15,867,999 15,736,956 15,867,999 15,736,956
Investment in subsidiary 22 - - 2,500 2,500
Loan swap asset 23 994,263 1,305,321 994,263 1,305,321
Restricted deposits 24 - 31,896 - 31,896
25,408,293 25,727,272 25,410,821 25,727,558
CURRENT ASSETS
Inventories 25 1,290,102 1,346,118 1,287,843 1,335,538
Trade and other receivables 26 401,750 525,574 326,328 399,452
Amount due from related parties 27 - 474 350,397 402,613
Taxation recoverable 16(c) 66,885 76,811 67,023 72,169
Short term deposits 24 38,672 36,553 38,672 36,553
Bank balances and cash 28 151,686 129,318 144,690 104,939
1,949,095 2,114,848 2,214,953 2,351,264
TOTAL ASSETS 27,357,388 27,842,120 27,625,774 28,078,822
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital 29(a) 450,000 450,000 450,000 450,000
Share premium 29(b) 648,000 648,000 648,000 648,000
Asset revaluation reserve 29(c) 1,650,387 1,465,726 1,650,387 1,465,726
Retained earnings 14,115,692 15,370,759 14,405,323 15,621,989
Foreign currency translation reserve 29(d) 26,904 12,275 - -
TOTAL EQUITY 16,890,983 17,946,760 17,153,710 18,185,715
NON CURRENT LIABILITIES
Loan swap liability 23 882,792 1,186,082 882,792 1,186,082
Staff gratuity 31 1,205,875 1,088,970 1,205,608 1,088,696
Long - term loan 32(c) 1,776,595 2,176,606 1,776,595 2,176,606
Deferred taxation 33 404,930 481,582 404,930 481,582
4,270,192 4,933,240 4,269,925 4,932,966
LIABILITIES
Current portion of long - term loans 32(c) 862,029 716,751 862,029 716,751
Post import finance loans 32(d) 308,878 - 308,878 -
Bank overdraft 34 2,069,634 1,606,770 2,069,634 1,606,770
Trade and other payables 35 2,853,992 2,536,919 2,859,918 2,534,940
Dividends payable 36 101,680 101,680 101,680 101,680
6,196,213 4,962,120 6,202,139 4,960,141
TOTAL EQUITY AND LIABILITIES 27,357,388 27,842,120 27,625,774 28,078,822
The financial statements on pages 42 to 88 were approved and authorised for issue by the board of directors on 2017 and were signed on
its behalf by:

William Lay Simon Peter Ole Nkeri
43
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
44
FO R T H E Y E A R E N D E D 3 0 J u n e 2 0 1 7
Retained earnings
Investment Foreign
Asset property Total currency
Share Share revaluation revaluation Realised retained translation
capital premium reserve* gains profits earnings reserve** Total
Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000
At 1 July 2015 450,000 648,000 1,666,628 9,022,309 2,001,793 11,024,102 20,863 13,809,593
Transfer of excess depreciation - - (287,003) - 287,003 287,003 - -
Deferred tax on excess depreciation - - 86,101 - (86,101) (86,101) - -
Profit/(loss) for the year - - - 4,367,158 (221,403) 4,145,755 - 4,145,755
Other comprehensive income - - - - - - (8,588) (8,588)
Total comprehensive income for the year - - - 4,367,158 (221,403) 4,145,755 (8,588) 4,137,167
At 30 June 2016 450,000 648,000 1,465,726 13,389,467 1,981,292 15,370,759 12,275 17,946,760
At 1 July 2016 450,000 648,000 1,465,726 13,389,467 1,981,292 15,370,759 12,275 17,946,760
Transfer of excess depreciation - - (308,992) - 308,992 308,992 - -
Deferred tax on excess depreciation - - 92,698 - (92,698) (92,698) - -
Profit/(loss) for the year - - - 58,970 (1,530,331) (1,471,361) - (1,471,361)
Other comprehensive income - - 572,793 - - - 14,629 587,422
Deferred tax on revaluation surplus - - (171,838) - - - - (171,838)
Total comprehensive income for the year - - 400,955 58,970 (1,530,331) (1,471,361) 14,629 (1,055,777)
At 30 June 2017 450,000 648,000 1,650,387 13,448,437 667,255 14,115,692 26,904 16,890,983
* The asset revaluation reserve represents the surplus arising from revaluation of property, plant and equipment and is not distributable.
** The translation reserve represents the effect of the change in exchange rates at the beginning of the year and at the close of the year on translation
COMPANY STATEMENT OF CHANGES IN EQUITY

Retained earnings
Investment
Asset property Total
Share Share revaluation revaluation Realised Retained
capital premium reserve* gains profit earnings Total
Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000
At 1 July 2015 450,000 648,000 1,666,628 9,022,309 2,214,070 1 1,236,379 14,001,007
Transfer of excess depreciation - - (287,003) - 287,003 287,003 -
Deferred tax on excess depreciation - - 86,101 - (86,101) (86,101) -
Transfer of revaluation surplus on disposal
of equipment (net of deferred tax) - - - - - - -
Dividends paid - - - - - - -
Profit for the year - - - 4,367,158 (182,450) 4,184,708 4,184,708
Other comprehensive income - - - - - - -
Total comprehensive income for the year - - - 4,367,158 (182,450) 4,184,708 4,184,708
At 30 June 2016 450,000 648,000 1,465,726 13,389,467 2,232,522 15,621,989 18,185,715
At 1 July 2016 450,000 648,000 1,465,726 13,389,467 2,232,522 15,621,989 18,185,715
Transfer of excess depreciation - - (308,992) - 308,992 308,992 -
Deferred tax on excess depreciation - - 92,698 - (92,698) (92,698) -
Profit for the year - - - 58,970 (1,491,930) (1,432,960) (1,432,959)
Other comprehensive income - - 572,793 - - - 572,793
Deferred tax on revaluation surplus - - (171,838) _________ ________ _________ (171,838)
Total comprehensive income for the year - - 400,955 58,970 (1,491,930) (1,432,960) (1,032,005)
At 30 June 2017 450,000 648,000 1,650,387 13,448,437 956,886 14,405,323 17,153,710

* The asset revaluation reserve represents the surplus arising from revaluation of property, plant and equipment and is not distributable.
45
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS

GROUP COMPANY
Note 2017 2016 2017 2016
CASH FLOWS FROM OPERATING
ACTIVITIES
Net cash (used in)/generated from operations 37(a) (29,053) 829,567 8,931 810,682
Interest paid 37(c) (536,217) (470,979) (536,217) (470,979)
Interest received 11 2,136 4,357 2,070 4,208
Income tax paid 16(c) (2,302) (4,593) (1,801) (794)
Net cash (used in)/generated from
operating activities (565,886) 358,352 (527,017) 343,117
CASH FLOWS FROM INVESTING

ACTIVITIES
Purchase of property, plant and
equipment 18 (84,314) (467,001) (84,314) (467,001)
Additions to capital work-in-progress 19 (5,258) (101,186) (5,258) (101,186)
Redemption of restricted deposits 31,896 31,896
Proceeds of sale of motor vehicles 8,786 4,070 1,930 4,070
Net cash used in investing activities (48,890) (564,117) (55,746) (564,117)
CASH FLOWS FROM FINANCING

ACTIVITIES
Receipt of Government Debt 371,984 371,984 -
Receipt of asset finance loan 37(b) 175,000 323,636 175,000 323,636
Repayment of asset finance loan 37(b) (387,450) (425,324) (387,450) (425,324)
Loan repayment 37(b) (306,643) (383,504) (306,643) (383,504)
Receipt of post import finance loans 37(b) 563,493 700,288 563,493 700,288
Repayment of post import finance loans 37(b) (254,614) (1,001,194) (254,614) (1,001,194)
Repayment of finance lease obligation 37(d) - (16,331) - (16,331)
financing activities 161,770 (802,429) 161,770 (802,429)
DECREASE IN CASH AND

CASH EQUIVALENTS (453,006) (1,008,194) (420,994) (1,023,429)
Effects of exchange rate changes
on the balance of cash 14,629 (8,588) - -
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF THE YEAR (1,440,899) (424,117) (1,465,278) (441,849)
CASH AND CASH EQUIVALENTS
AT THE END OF THE YEAR 37(e) (1,879,276) (1,440,899) (1,886,272) (1,465,278)
46
NOTES TO THE CONSOLIDATED AND

COMPANY FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The East African Portland Cement Company Limited is incorporated in Kenya under the Kenyan Companies Act. The company manufactures
and sells cement in East Africa.
The shares of the company are listed on the Nairobi Securities Exchange.
2. GOING CONCERN
The Group reported a loss from operations of Kshs 1.3 Billion (2016: Kshs 1.6Billion) with staff costs representing 41% of its revenue at Kshs
2.8 Billion (2016: Kshs 2.7Billion).The current liabilities exceeded current assets by Kshs 4.2 Billion (2016: Kshs 2.8 Billion). Management has
put in place various strategies and has sought the appropriate necessary support from the government and other key shareholders towards
raising the required financing. This is meant to support capitalization of the business, modernization of the ageing plant and enhancement
of the current working capital facilities for importation of bulk raw materials to enable optimization of the current installed cement milling
and packing capacity.
The above initiatives among other strategies which the management has put in place are expected to increase turnover, rationalize costs and
turn around the business.
On this basis, the directors consider it appropriate to prepare the financial statements on the going concern basis.
3. ACCOUNTING POLICIES
Statement of compliance
The consolidated and company financial statements (“financial statements”) are prepared in accordance and comply with International
Financial Reporting Standards and the requirements of the Kenyan Companies Act.
For the Kenyan Companies Act reporting purposes, in these financial statements the balance sheet is represented by/is equivalent to the
statement of financial position and the profit and loss account is presented in the statement of profit or loss and other comprehensive income.
The principal accounting policies adopted in the preparation of these financial statements remain unchanged from the previous years.
Application of new and revised International Financial Reporting Standards (IFRSs)
i. Relevant new standards and amendments to published standards effective for the year ended 30 June 2017
The following new and revised standards and interpretations were effective in the current year and had no material impact on the
amounts reported in these financial statements.
Amendments to IAS 12 The amendments to IAS 12 Income Taxes clarify the following aspects:
Recognition of
Deferred Tax Assets Unrealised losses on debt instruments measured at fair value and measured at cost for tax for
Unrealised Losses purposes give rise to a deductible temporary difference regardless of whether the debt instrument’s

holder expects to recover the carrying amount of the debt instrument by sale or by use.

The carrying amount of an asset does not limit the estimation of probable future taxable profits.
Estimates for future taxable profits exclude tax deductions resulting from reversal of deductible
temporary
differences.
An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law
restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with

other deferred tax assets of the same type.
The amendments to the standard has had no impact on the Group’s financial statements.
Annual Improvements The annual improvements to IFRSs 2012-2014 cycle include a number of
2010-2012 amendments to various IFRSs, which are summarised below:
The amendments to IFRS 5 add specific guidance in IFRS 5 for cases in which an entity reclassifies
an asset from held for sale to held for distribution or vice versa and cases in which held-for-
distribution
accounting is discontinued.
The amendments to IFRS 7 add additional guidance to clarify whether a servicing contract is
continuing involvement in a transferred asset for the purpose of determining the disclosures
required. Clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to
condensed
interim financial statements.
The amendments to IAS 19 clarify that the high quality corporate bonds used in estimating the
discount rate for post-employment benefits should be denominated in the same currency as the
47

COMPANY FINANCIAL STATEMENTS (Contd.)
benefits to be paid (thus, the depth of the market for high quality corporate bonds should be
assessed at currency level).

The amendment to IAS 34 clarifies the meaning of ‘elsewhere in the interim report’ and requires a
cross-reference.

The application of these amendments has had no material impact on the disclosures or on the
amounts recognised in the Group’s financial statements.
Amendments to IAS 7 The amendments to IAS 7 Presentation of Financial Statements address perceived impediments
Disclosure Initiative to preparers exercising their judgement in presenting their financial reports by making the
following changes:
a. clarification that information should not be obscured by aggregating or by providing
immaterial information, materiality considerations apply to the all parts of the financial
statements, and even when a standard requires a specific disclosure, materiality considerations
do apply;
b. clarification that the list of line items to be presented in these statements can be disaggregated
and aggregated as relevant and additional guidance on subtotals in these statements;
c. clarification that an entity’s share of Other Comprehensive Income of equity-accounted
associates and joint ventures should be presented in aggregate as single line items based on
whether or not it will subsequently be reclassified to profit or loss; and
d. additional examples of possible ways of ordering the notes to clarify that understandability
and comparability should be considered when determining the order of the notes and to
demonstrate that the notes need not be presented in the order so far listed in paragraph 114
of IAS 1.
The amendments to the standard has had no impact on the Group’s financial statements.
ii. Relevant new and amended standards and interpretations in issue but not yet effective in the year ended 30 June 2017

New and Amendments to standards Effective for annual periods beginning
or after
IFRS 9 Financial Instruments 1 January 2018
IFRS 15 Revenue from contracts with customers 1 January 2018
IFRS 16 Leases 1 January 2019
Amendments to IAS 7: Disclosure Initiative 1 January 2017
Amendments to IAS 12 Recognition of Deferred Tax Assets
for Unrealised Losses 1 January 2017
Annual Improvements to 2014-2016 cycle 1 January 2017
iii. Impact of relevant new and amended standards and interpretations on the financial statements for the year ended 30 June
2017 and future annual periods
IFRS 9 Financial Instruments

IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets.
IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of
financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting.
Another revised version of IFRS 9 was issued in July 2014 mainly to include:
a. impairment requirements for financial assets and

b. limited amendments to the classification and measurement requirements by introducing a ‘fair value through other
comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments.
Key requirements of IFRS 9:

All recognised financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortised cost or
fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are
generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a
business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
48

amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments are measured at their
fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to
present subsequent changes in the fair value of an equity investment (that is not held for trading nor contingent consideration
recognised by an acquirer in a business combination to which IFRS 3 applies) in other comprehensive income, with only dividend
income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the
amount of change in the fair value of a financial liability that is attributable to changes in the credit risk of that liability is presented
in other comprehensive income, unless the recognition of such changes in other comprehensive income would create or enlarge
an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently
reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair
value through profit or loss is presented in profit or loss.
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss
model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those
expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer
necessary for a credit event to have occurred before credit losses are recognized.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in
IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically
broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items
that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an
‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure
requirements about an entity’s risk management activities have also been introduced.
Based on an analysis of the Group’s financial assets and financial liabilities as at 31 December 2016 on the basis of the facts and
circumstances that exist at that date, the directors of the Group have performed a preliminary assessment of the impact of IFRS 9
to the Group’s financial statements as follows:
Classification and measurement

Loans carried at amortised cost as disclosed in note 23: these are held within a business model whose objective is to collect the
contractual cash flows that are solely payments of principal and interest on the principal outstanding. Accordingly, these financial
assets will continue to be subsequently measured at amortised cost upon the application of IFRS 9;
All other financial assets and financial liabilities will continue to be measured on the same bases as is currently adopted under IAS 39.
Impairment
Financial assets measured at amortised cost, listed redeemable notes that will be carried at FVTOCI under IFRS 9, finance lease
receivables, amounts due from customer under construction contracts, and financial guarantee contracts will be subject to the
impairment provisions of IFRS 9.

The Group expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables, as required
or permitted by IFRS 15. The Group does not hold any listed redeemable notes, finance lease receivables, amounts due from
customer under construction contracts or financial guarantee contracts. In general, the directors anticipate that the application
of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for the financial assets measured at
amortised cost and are currently assessing the potential impact.
Hedge accounting
The new hedge accounting requirements will align more closely with the Group’s risk management policies, with generally more
qualifying hedging instruments and hedged items. The Group does not hold any hedging relationships, and therefore the directors
do not anticipate that the application of the IFRS 9 hedge accounting requirements will have an impact on the Group’s financial
statements.
It should be noted that this assessment was made based on an analysis of the Group’s financial assets and financial liabilities as at
30 June 2017 on the basis of the facts and circumstances that existed at that date. As facts and circumstances may change during the
period leading up to the initial date of application of IFRS 9, which is expected to be 1 January 2018 as the Group does not intend
to early apply the standard, the assessment of the potential impact is subject to change.
IFRS 15 Revenue from Contracts with Customers

In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue
49

arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18
Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services.
Specifically, the Standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or
services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been
added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. The directors of the
group anticipate that the application of IFRS 15 in the future may not have a significant impact on amounts reported in respect of
the group’s financial statements because the group does not engage in any complex revenue contracts.
IFRS 16 Leases
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the
underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor
accounting substantially unchanged from its predecessor, IAS 17.
The directors of the Group do not anticipate that the application of IFRS 16 in the future will have a significant impact on amounts
reported in respect of the Group’s financial assets and financial liabilities. However, it is not practical to provide a reasonable
estimate of the effect of IFRS 16 until a detailed review has been completed.
iv. Early adoption of standard

The group did not early-adopt any new or amended standards in the period.
Basis of preparation
The financial statements are prepared under the historical cost convention as modified by revaluation of certain assets.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the
price that would be received to sell an asset or paid to transfer liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In
estimating the fair value of an asset or liability, the company takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the measurement date.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have
been consistently applied, unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the company
and its subsidiary. Control is achieved when the company:
• has power over the investee;is exposed, or has rights, to variable returns from its involvement with the investee; and has the
ability to use its power to affect its returns
• The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control listed above.
When the company has less than a majority of the voting rights of an investee, it has power over the investee when the voting
rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The company considers
all relevant facts and circumstances in assessing whether or not the company’s voting rights in an investee are sufficient to give it
power, including:
• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the company, other vote holders or other parties; rights arising from other contractual
arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct
50

the relevant activities at the time that decisions need the cost of those assets, until such time as the assets are
to be made, including voting patterns at previous substantially ready for their intended use or sale.
shareholder’s meetings.
All other borrowing costs are recognised in profit or loss in
Consolidation of a subsidiary begins when the company the period in which they are incurred.
obtains control over the subsidiary and ceases when the
company loses control of the subsidiary. Specifically, Taxation
income and expenses of a subsidiary acquired or disposed Current tax
of during the year are included in the consolidated Current tax assets for the current and prior periods are
statement of profit or loss and other comprehensive measured at the amount expected to be recovered from
income from the date the company gains control until the or paid to the taxation authorities. The tax rates and tax
date when the company ceases to control the subsidiary. laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Profit or loss and each component of other comprehensive Current tax relating to items recognised directly in other
income are attributed to the owners of the company and to comprehensive income or equity is recognised in other
the non-controlling interests. Total comprehensive income comprehensive income or equity and not in profit or loss.
of subsidiaries is attributed to the owners of the Company
and to the non-controlling interest even if this results in Deferred tax
the non-controlling interests having a deficit balance. Deferred tax is provided for using the liability method, for
When necessary, adjustments are made to the financial all temporary differences arising between the tax bases of
statements for subsidiaries to bring their accounting assets and liabilities and their carrying values for financial
policies into line with the Group’s accounting policies. reporting purposes. Deferred tax assets and liabilities are
measured at the tax rates that are expected to apply to
All intragroup assets and liabilities, equity, income, the year when the asset is realised or the liability is settled,
expenses and cash flows relating to the transactions based on tax rates (and tax laws) that have been enacted
between the members of the Group are eliminated in full or substantively enacted at the reporting date. Deferred
on consolidation. income tax relating to items recognised directly in other
comprehensive income or equity is recognised in other
Revenue recognition comprehensive income or equity and not in profit or loss.
i. Sale of goods Deferred tax liabilities are recognised for all taxable
Revenue is measured at the fair value of the consideration temporary differences, except:
received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances. • In respect of taxable temporary differences associated
with investments in subsidiaries, associates and
Revenue from the sale of goods is recognised when all the interests in joint ventures, where the timing of
following conditions are satisfied: the reversal of the temporary differences can be
• the Group has transferred to the buyer the significant controlled and it is probable that the temporary
risks and rewards of ownership of the goods; differences will not reverse in the foreseeable future.
the Group retains neither continuing managerial
• Deferred income tax assets are recognised for all
involvement to the degree usually associated with
deductible temporary differences, carry forward
• ownership nor effective control over the goods sold;
of unused tax credits and unused tax losses, to the
the amount of revenue can be measured reliably;
extent that it is probable that taxable profit will be
• it is probable that the economic benefits associated
available against which the deductible temporary
with the transaction will flow to the entity; and the
differences, and the carry forward of unused tax
costs incurred or to be incurred in respect of the
credits and unused tax losses can be utilised except
transaction can be measured reliably.
when the deferred tax asset relating to the deductible
temporary difference arises from the initial
ii. Interest income
recognition of an asset or liability in a transaction that
Interest income is accrued on a time basis, by reference
is not a business combination and, at the time of the
to the principal outstanding and at the effective interest
transaction, affects neither the accounting profit nor
rate applicable, which is the rate that exactly discounts
taxable profit or loss.
estimated future cash receipts through the expected life
The carrying amount of deferred tax assets is reviewed at each
of the financial asset to that asset’s net carrying amount on
reporting date and reduced to the extent that it is no longer
initial recognition.
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
Borrowing costs
deferred tax assets are reassessed at each reporting date and
Borrowing costs directly attributable to the acquisition,
are recognised to the extent that it has become probable that
construction or production of qualifying assets, which are
future taxable profit will allow the deferred tax asset to be
assets that necessarily take a substantial period of time
recovered.
to get ready for their intended use or sale, are added to
51

Deferred tax assets and deferred income tax liabilities are offset, the extent that it offsets an existing surplus on the same asset
if a legally enforceable right exists to set off current tax assets recognised in the asset revaluation reserve.
against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same tax authority. Additionally, accumulated depreciation as at the revaluation
date is eliminated against the gross carrying amount of the asset
Foreign currencies and the net amount is restated to the revalued amount of the
In preparing the financial statements of each group entity, asset.
transactions in currencies other than the functional currency
are recognized at the rates of exchange prevailing at the dates Capital work in progress
of the transactions. Assets in the course of construction for production or
At the end of each reporting period, monetary items administrative purposes are carried at cost, less any recognised
denominated in foreign currencies are retranslated at the rates impairment loss. Cost includes professional fees and, for
prevailing at that date. Exchange differences arising, if any, qualifying assets, borrowing costs capitalised in accordance
are recognized in profit or loss. Non-monetary items carried with the Group’s accounting policy. Such assets are classified
at fair value that are denominated in foreign currencies are to the appropriate categories of property, plant and equipment
retranslated at the rates prevailing at the date when fair value when completed and ready for intended use. Depreciation of
was determined. Non-monetary items that are measured in these assets, on the same basis as other assets, commences
terms of historical costs are not retranslated. when the assets are ready for their intended use.
The individual financial statements of each Group entity are Depreciation

presented in the currency of the primary economic environment No depreciation is provided on freehold land as the useful life
in which the entity operates. For the purpose of the consolidated is considered to be indefinite. Depreciation on other items of
financial statements, the results and financial position of each property, plant and equipment is charged on the straight-line
Group entity are expressed in Kenya shillings, which is the basis over the estimated useful lives of the assets.
functional currency of the company and the presentation
currency for the consolidated financial statements. Critical spares are depreciated over the period starting when
the item is brought into service and continuing over the shorter
For the purpose of presenting consolidated financial statements, of its useful life and the remaining expected useful life of the
the assets and liabilities of the Group’s foreign operations are asset to which it relates.
translated to Kenya shillings using exchange rates prevailing
at the end of reporting date. Income and expense items The rates of depreciation used are based on the following
are translated at the average exchange rates for the period. estimated useful lives:
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity in the Buildings lease, 40 years or period of
Group’s translation reserve. Such differences are recognised in whichever is less
the profit or loss in the period in which the foreign operation is Plant and machinery 8 to 20 years
disposed of.
Motor vehicles 3 to 4 years
Property, plant and equipment 4 to 20 years
Property, plant and equipment are initially recognised at cost Office equipment, furniture 3 years
and subsequently stated at professionally revalued amounts less and fittings Computers
accumulated depreciation and impairment losses. An item of
property, plant and equipment is derecognised upon disposal The residual values and useful lives are reassessed annually and
or when no future economic benefits are expected from its adjusted prospectively if appropriate.
use or disposal. Any gain or loss arising on derecognising of
the asset (calculated as the difference between the net disposal Where the residual value exceeds the carrying value, no
proceeds and the carrying amount of the asset) is included in depreciation is charged in the next year.
profit or loss in the year the asset is derecognised.
Critical spare parts and standby equipment which are expected The excess annual depreciation attributable to revaluation
to be in use during more than one period are accounted for as surplus on property, plant and equipment is transferred
property, plant and equipment. annually from the asset revaluation reserve to the retained
earnings. Upon disposal, any revaluation reserve relating to the
The Group policy is to professionally revalue property, plant and particular asset being sold is transferred to retained earnings
equipment at least once every three to five years. The property,
plant and equipment were revalued as at 30 June 2017. Leases
The determination of whether an arrangement is, or contains, a
Any surplus on revaluation is recognised in other comprehensive lease is based on the substance of the arrangement at inception
income and accumulated in the asset revaluation reserve date: whether fulfillment of the arrangement is dependent on
in equity, except to the extent that it reverses a revaluation the use of a specific asset or assets or the arrangement conveys
decrease of the same asset previously recognised in profit or a right to use the asset.
loss, in which case the increase is recognised in profit or loss.
A revaluation deficit is recognised in profit or loss, except to Leases are classified as finance leases whenever the terms of the
52

lease transfer substantially all risks and rewards of ownership to expense category consistent with the function of the intangible
the group as the lessee. Leases where a significant portion of asset. Periodic software maintenance costs are recognised as an
the risks and rewards of ownership are retained by the lessor, expense when incurred.
are classified as operating leases.
Gains or losses arising from derecognising of an intangible
Finance leases are capitalised at the commencement of the asset are measured as the difference between the net disposal
lease at the fair value of the leased property or, if lower, at the proceeds and the carrying amount of the asset and are
present value of the minimum lease payments. Lease payments recognised in profit or loss when the asset is derecognised.
are apportioned between finance charges and reduction of
the lease liability so as to achieve a constant rate of interest Investment properties
on the remaining balance of the liability. Finance charges are Investment properties are measured initially at cost, including
recognised in profit or loss. transaction costs, and excluding the costs of day to day servicing
of an investment property. Subsequent to initial recognition,
Leased assets are depreciated over the useful life of the asset. investment properties are stated at fair value, which reflects
However, if there is no reasonable certainty that the Group market conditions at the reporting date. Gains or losses arising
will obtain ownership by the end of the lease term, the asset is from changes in the fair values of investment properties are
depreciated over the shorter of the estimated useful life of the included in profit or loss in the year in which they arise.
asset and the lease term.
Investment properties are derecognised when either they
Operating lease payments are recognised as an expense in have been disposed of or when the investment property is
profit or loss on a straight line basis over the lease term. permanently withdrawn from use and no future economic
benefit is expected from its disposal. Any gains or losses on the
Inventories retirement or disposal of an investment property are recognised
Inventories are stated at the lower of cost and net realisable in profit or loss in the year of retirement or disposal.
value. Cost comprises direct materials and, where applicable,
direct labour costs and the overheads incurred in bringing Transfers are made to or from investment property only when
the inventories to their present location and condition. Costs there is a change in use.
of direct materials are determined on the first-in first-out basis,
while those of general consumable stores are determined on A property interest that is held by a lessee under an operating
the weighted average cost basis. Net realisable value represents lease may be classified and accounted for as investment
the estimated selling price less the estimated cost to completion property if, and only if, the property would otherwise meet the
and costs to be incurred in marketing, selling and distribution. definition of an investment property and the lessee uses the fair
Work-in-progress, which comprises raw meal and clinker, is value model to recognise the asset. This classification alternative
stated at the lower of production cost and net realisable value. is available on a property-by-property basis. However, once
Production cost comprises expenditure directly incurred in this classification alternative is selected for one such property
the manufacturing process and allocation of fixed and normal interest held under an operating lease, all property classified as
production overheads attributable to the process. investment property shall be accounted for using the fair value
model.
Intangible assets
Intangible assets acquired separately are measured on Leasehold land
initial recognition at cost. Subsequently, amortisation and Payments to acquire interests in leasehold land are treated as
accumulated impairment losses are netted from the cost. prepaid operating leases. They are stated at historical cost and
Expenditure on internally generated intangible assets, excluding are amortised over the term of the related lease.
capitalised development costs, is reflected in profit or loss in the
year in which it is incurred. Financial instruments
A financial instrument is a contract that gives rise to both a
Intangible assets with finite lives are amortised on a straight line financial asset of one enterprise and a financial liability of another
basis over their useful economic lives from the date they are enterprise. The group classifies its financial assets into the
available for use, up to a maximum of three years. Intangible following categories: Financial assets at fair value through profit
assets are assessed for impairment whenever there is an or loss; loans and receivables; held to maturity investments;
indication that an intangible asset may be impaired. and available-for-sale assets. Management determines the
appropriate classification of its investments at initial recognition
The amortisation period and the amortisation method for an and re-evaluates its portfolio every reporting date to ensure that
intangible asset with a finite useful life is reviewed at least at all financial instruments are appropriately classified.
each financial year-end.
Purchase and sale of financial assets that require delivery of
Changes in the expected useful life or the expected pattern assets within the period generally established by regulation or
of consumption of future economic benefits embodied in the convention in the market place (regular way purchases) are
asset is accounted for by changing the amortisation period recognised on the trade date, which is the date that the group
or method, as appropriate, and are treated as changes in commits to purchase or sell the asset.
accounting estimates. The amortisation expense on intangible
assets with finite lives is recognised in profit or loss in the Financial assets are initially recognised at fair value plus
53

transaction costs for all financial assets not carried at fair value short duration with no stated interest rate and are measured at
through profit or loss. amortised cost using the effective interest rate.
Financial assets at fair value through profit or loss Derivative financial instruments
Financial assets at fair value through profit or loss include The Company holds derivative financial instruments to manage
financial assets held for trading and financial assets designated exposures to interest rate and foreign currency risks. These
upon initial recognition at fair value through profit or loss. derivates are initially recognised at fair value plus transaction
Financial assets are classified as held for trading if they are costs. They are subsequently carried at fair value. A derivative
acquired for the purpose of selling or repurchasing in the near with a positive fair value is recognised as a financial asset; a
term. This category includes derivative financial instruments derivative with a negative fair value is recognised as a financial
entered into by the group that are not designated as hedging liability. A derivative is presented as a non-current asset or a
instruments in hedge relationships as defined by IAS 39. non-current liability if the remaining maturity of the instrument
Derivatives, including separated embedded derivatives are is more than 12 months and it is not expected to be realised
also classified as held for trading unless they are designated or settled within 12 months. Other derivatives are presented as
as effective hedging instruments. Financial assets at fair value current assets or current liabilities. They are derecognised when
through profit and loss are carried in the statement of financial the rights to receive cash flows from the financial assets have
position at fair value. Gains and losses arising from changes in expired or where the company has transferred substantially all
the fair value are included in profit or loss in the period in which risks and rewards of ownership.
they arise.
Derecognition
Financial assets held to maturity A financial asset is derecognised when the group loses control
Held-to-maturity financial assets are non-derivative financial over the contractual rights that comprise that asset and has
assets with fixed or determinable payments and fixed maturities transferred its right to cash flows from the asset or has assumed
that management has the positive intention and ability to hold an obligation to pay the received cash flows without material
to maturity. Subsequent to initial recognition, held to maturity delay to a third party under a ‘pass through’ arrangement; and
investments are measured at amortised cost using the effective either (a) the group has transferred substantially all the risks
interest rate method less any impairment. and rewards of the assets, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but
Loans and receivables has transferred control of the asset.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active A financial liability is derecognised when the obligation under
market and include receivables arising from day to day sale of the liability is discharged or cancelled or expires. When an
goods and services. They are measured at amortised cost less existing financial liability is replaced by another by the same
impairment losses using the effective interest rate method (EIR). lender on substantially different terms, or the terms of the
Amortised cost is calculated by taking into account any discount existing liability are substantially modified, such an exchange or
or premium on acquisition and fees or costs that are an integral modification is treated as a derecognition of the original liability
part of the EIR. The EIR amortisation is included in finance and the recognition of a new liability and the difference in the
income in profit or loss. respective carrying amounts are recognised in the statement of
comprehensive income.
Trade and other receivables consist of all receivables which are Offsetting
of short duration with no stated interest rate and are measured Financial assets and liabilities are offset and the net amounts
at amortised cost using the effective interest rate. An allowance reported on the statement of financial position when there is
is made for any unrecoverable amounts. a currently legally enforceable right to set off the recognised
amount and there is an intention to settle on a net basis, or to
For the purpose of the statement of cash flows, cash equivalents realise the assets and settle the liability simultaneously.
include short term liquid investments which are readily
convertible to known amounts of cash and which were within Dividends payable
three months to maturity when acquired, less advances from Dividends payable on ordinary shares are charged to retained
banks repayable within three months from date of disbursement earnings in the period in which they are declared. Proposed
or confirmation of the advance. Cash and cash equivalents are dividends are not accrued for until ratified in an Annual General
measured at amortised cost. Meeting.
Borrowings Mining and exploration costs

Interest bearing loans are recorded at the fair value of the All exploration costs for the mining of limestone are expensed in
proceeds received. Finance charges are recognised on the the period that they occur and form part of cost of sales.
accrual basis and are added to the carrying amount of the
related instrument to the extent that they are not settled in the Impairment
period they arise. i. Financial assets
Trade payables The Group assesses at each reporting date whether there
is any objective evidence that a financial asset or group of
Trade and other payables consist of all payables which are of
54

financial assets is impaired. If there is objective evidence amount does not exceed the carrying amount that would
that an impairment loss on assets carried at amortized cost have been determined, net of depreciation or amortisation,
has been incurred, the amount of the loss is measured as if no impairment loss had been recognised.
the difference between the asset’s carrying amount and
the present value of estimated future cash flows (excluding Segmental reporting
future expected credit losses that have not been incurred) Operating segments are reported in a manner consistent with
discounted at the financial asset’s original effective interest the internal reporting provided to the Chief Operating Decision
rate (i.e. the effective interest rate computed at initial maker (Board of Directors). Management allocates resources
recognition). The carrying amount of the asset is reduced to and assess the performance of the operating segments of
through use of an allowance account. The amount of the the Group. The operating segments are based on the Group’s
loss is recognised in profit or loss. management and internal reporting structure. In accordance
with IFRS 8 the Group has the following geographical segments;
If, in a subsequent period, the amount of the impairment Kenya and Regional market segments (see note 40).
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, Provisions
the previously recognised impairment loss is reversed, Provisions are recognised when the Group has a present legal
to the extent that the carrying value of the asset does or constructive obligation as a result of past events and it is
not exceed its amortised cost at the reversal date. Any probable that an outflow of resources embodying economic
subsequent reversal of an impairment loss is recognised benefits will be required to settle the obligation and a reliable
in profit or loss. estimate of the amount of the obligation can be made.
Impaired debts are derecognized when they are assessed Where the effect of the time value of money is material, the
as uncollectible. amount of a provision is the present value of the expenditure
expected to be required to settle the obligation, discounted at
In relation to trade receivables, an allowance for a rate that reflects current market assessments of the time value
impairment is made when there is objective evidence (such of money and the risks specific to the liability.
as the probability of insolvency or significant financial
difficulties of the debtor) that the group will not be able to Provision for employee entitlements
collect all of the amounts due under the original terms of Employee entitlements to annual leave are recognised when
the invoice. Any subsequent reversal of an impairment loss they accrue to employees. A provision is made for the estimated
is recognised in profit or loss. liability for annual leave accrued at the reporting date. The
group’s unionisable staff who resign or whose services
ii. Non-financial assets are terminated either due to illness or other reasons after
completion of ten years of continuous and meritorious service
The carrying amounts of the Group’s non-financial assets
are entitled to twenty one days’ pay for each completed year of
are reviewed at each reporting date to determine whether
service by way of gratuity, based on the wages or salary at the
there is any indication of impairment. If any such indication
time of such resignation or termination of services, as provided
exists then the asset’s recoverable amount is estimated.
for in the trade union agreement. The group’s employees under
An impairment loss is recognised if the carrying amount of
contract terms are also entitled to gratuity at the rate of 25% of
an asset or its cash-generating unit exceeds its recoverable
their annual basic salary for each completed year of service. An
amount. A cash-generating unit is the smallest identifiable
employee who is dismissed or terminated for gross misconduct
asset group that generates cash flows that largely are
is not entitled to gratuity. The service gratuity is provided for
independent from other assets and groups. Impairment
in the consolidated financial statements at the present value of
losses are recognised in profit or loss. Impairment losses
benefits payable as it accrues to each employee.
recognised in respect of cash-generating units reduce the
carrying amount of the other assets in the unit (group of
Employee benefits
units) on a pro rata basis.
i. Short-term benefits
The recoverable amount of an asset or cash-generating
unit is the greater of its value in use and its fair value Short-term benefits consist of salaries, bonuses and any non-
less costs to sell. In assessing value in use, the estimated monetary benefits such as medical aid contributions and free
future cash flows are discounted to their present value services. They exclude equity based benefits and termination
using a pre-tax discount rate that reflects current market benefits. Short-term employee benefit obligations are measured
assessments of the time value of money and the risks on an undiscounted basis and are expensed as the related
specific to the asset. service is provided.
Impairment losses recognised in prior periods are A provision is recognised for the amount expected to be paid
assessed at each reporting date for any indications that under a short-term cash bonus only if the group has a present
the loss has decreased or no longer exists. An impairment legal or constructive obligation to pay this amount as a result of
loss is reversed if there has been a change in the estimates past services provided by the employee and if the obligation can
used to determine the recoverable amount. An impairment be measured reliably.
loss is reversed only to the extent that the asset’s carrying
55

ii. Retirement benefit costs a. Critical judgements in applying accounting policies.

The group operates a funded defined contribution pension Deferred income tax
scheme for senior and supervisory staff, as well as an in-house Deferred tax assets are recognised for all unused tax losses to
gratuity scheme for unionisable employees. The group also the extent that it is probable that taxable profit will be available
contributes to the statutory National Social Security Funds in against which the losses can be utilised. Significant management
Kenya and Uganda. These are defined contribution schemes judgment is required to determine the amount of deferred tax
registered under Acts of Parliament in the respective countries. assets that can be recognised, based upon the likely timing and
Contributions are determined by local statutes in Kenya and level of future taxable profits together with future tax planning
Uganda. The group’s obligations under the schemes are limited strategies
to specific contributions legislated from time to time.
b. Key sources of estimation uncertainty
The Group’s obligations to all staff retirement benefits schemes
Property, plant and equipment and intangible assets
are charged to profit or loss as they fall due.
The Group reviews the estimated useful lives of property,
Comparatives plant and equipment and intangible assets at the end of each
Where necessary, comparative figures have been adjusted to reporting period.
conform with changes in presentation in the current year.
Investment properties
Estimates are used in adjusting inputs with the most significant
impact on valuations of investment properties and include
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY assumptions made in adjusting values of recent sales of
SOURCES OF ESTIMATION UNCERTAINTY neighbouring properties to take into account the size of the
In the application of the company’s accounting policies, which are group’s land and the cost of evicting squatters and securing
described in note 2, the directors are required to make judgements, the properties.
estimates and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. Inventories
The estimates and associated assumptions are based on historical The Group reviews the usability of spare parts at the end of each
experience and other factors that are considered to be relevant. reporting period as part of assessment of the carrying value of
Actual results may differ from these estimates. inventory relative to its net realisable value (NRV).
The estimates and underlying assumptions are reviewed on an Impairment

ongoing basis. Revisions to accounting estimates are recognised in At each reporting date, the Group reviews the carrying amounts
the period in which the estimate is revised if the revision affects only of its assets to determine whether there is any indication
that period, or in the period of the revision and future periods if the that those assets have suffered an impairment loss. If any
revision affects both current and future periods. such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment
Key areas of judgement and sources of estimation uncertainty loss. Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable
The following are the critical judgements and key assumptions amount of the cash generating unit to which the asset belongs.
concerning the future, and other key sources of estimation
uncertainty at the balance sheet date that have had the most
significant effect on amounts recognised in the financial statements Any impairment losses are recognised as an expense
and that have a significant risk of causing material adjustment to the immediately. Where an impairment loss subsequently reverses,
carrying amounts of assets and liabilities within the next financial the carrying amount of the asset is increased to the revised
year: estimate of its recoverable amount.
56

GROUP COMPANY
2017 2016 2017 2016
5. REVENUE
Bagged cement – local 6,350,611 8,071,528 6,350,611 8,071,528
Bagged cement – export 20,272 219,982 15,714 171,428
Bulk cement – local 548,640 565,049 548,640 565,049
Paving blocks 8,784 14,897 8,784 14,897
6,928,307 8,871,456 6,923,749 8,822,902
GROUP COMPANY
2017 2016 2017 2016
6. COST OF SALES
Raw materials used 1,448,686 2,419,160 1,448,686 2,419,160
Furnace oil 50,211 87,049 50,211 87,049
Coal 888,088 979,010 888,088 979,010
Factory staff costs 1,285,318 1,196,079 1,285,318 1,196,079
Power 854,370 936,677 854,370 936,677
Factory depreciation 617,688 585,367 617,688 585,367
Maintenance costs 362,477 374,832 362,477 374,832
Raw materials transport 244,568 229,394 244,568 229,394
Transport and import duty 2,471 24,840 - -
Factory direct supplies 81,042 51,884 81,042 51,884
Fuel and repairs 116,274 151,875 116,273 151,875
Factory insurance 24,704 33,054 24,704 33,054
Exploration expenses 2,463 4,651 2,463 4,651
Explosives 6,025 6,487 6,025 6,487
Royalties 100,687 120,645 100,687 120,645
Factory water 18,789 26,261 18,789 26,261
Factory land rates and rent 3,309 3,828 3,309 3,828
Consultancy fees (1,212) 13,257 (1,212) 13,257
Hired equipment 58,120 37,961 58,120 37,961
Other production overheads 1,418 1,637 1,419 1,637
6,165,496 7,283,948 6,163,025 7,259,108
7. OTHER OPERATING INCOME

Rent and electricity recovery 21,086 19,199 21,086 19,199
Sundry income 441 59,569 441 59,569
21,527 78,768 21,527 78,768
57

GROUP COMPANY
2017 2016 2017 2016
8. SELLING AND DISTRIBUTION EXPENSES
Cement transport 27,869 127,910 27,869 127,869
Advertising and sales commissions 25,042 22,234 25,042 19,213
Fuel and repairs 19,159 19,910 19,158 19,913
Depot rent 23,044 27,276 22,034 25,485
Public relations costs 11,638 13,047 11,638 12,836
Provision for bad and doubtful debts 24,316 87,357 34,524 77,343
131,068 297,734 140,265 282,659
9. ADMINISTRATION AND
ESTABLISHMENT EXPENSES
Staff costs 1,555,356 1,539,809 1,545,658 1,528,473
Depreciation of property, plant
and equipment 83,873 98,830 83,212 98,030
Amortisation of prepaid
operating leases 106 127 106 127
Office supplies 23,917 36,383 23,859 36,100
Travelling expenses 27,354 27,278 27,342 27,176
Hired services 55,806 78,608 55,659 78,016
Telephone and postage 12,801 14,933 12,701 14,666
Company functions 2,247 1,414 2,247 1,414
Board expenses 9,945 7,952 9,945 7,952
Printing and stationery 4,631 6,991 4,533 6,802
Motor vehicle expenses 3,968 7,352 3,939 7,154
Computer expenses 18,989 48,977 18,929 48,917
Electricity 1,561 1,763 1,453 1,637
Office general expenses 56,789 66,893 51,551 66,272
1,857,343 1,937,310 1,841,134 1,922,736
10. OTHER OPERATING EXPENSES

Professional fees 47,807 35,416 47,300 35,113
Subscriptions 4,077 1,884 4,078 1,884
Donations 20 - 20 -
Bank charges 39,129 17,728 39,071 17,553
Miscellaneous expenses - 602 - 602
Auditors’ remuneration 8,868 8,868 7,832 7,832
Tax provisions 152,090 - 152,090 -
Inventory provisions - 790,945 - 790,945
Loss on disposal of plant and equipment 9,637 - 9,637 -
Exchange loss on other foreign
currency transactions and balances 33,859 160,360 1,917 128,707
295,487 1,015,803 261,945 982,636
58

GROUP COMPANY
2017 2016 2017 2016
11. INTEREST INCOME
Interest income 2,136 4,357 2,070 4,208
I nterest income was earned on short term and restricted deposits which were held with KCB Bank Kenya Limited and Housing
Finance Company Limited respectively during the year
12. FINANCE COSTS

Interest on overdraft 289,111 140,868 289,111 140,868
Interest charged on loans 221,369 315,591 221,369 315,591
Interest on loan swap liability 44,102 57,672 44,102 57,672
Interest on lease obligation - 724 - 724
Fair value loss on derivatives (note 23) 62,435 103,270 62,435 103,270
617,017 618,125 617,017 618,125
13. (LOSS)/PROFIT BEFORE TAXATION

The (loss)/profit before taxation is arrived
at after charging:
Directors’ emoluments:
- Fees 1,100 1,008 1,100 1,008
- Other emoluments 47,222 22,704 47,222 22,704
Auditors’ remuneration 8,868 8,868 7,832 7,832
Staff costs (note 15) 2,840,674 2,735,888 2,830,976 2,724,552
Depreciation (note 18) 701,561 687,477 700,900 686,583
Prepaid operating lease rentals (note 20) 105 127 105 127
Inventory provisions - 790,945 - 790,945
Interest expense 554,582 514,855 554,582 514,855
Fair value loss on derivatives - - - -
Foreign exchange loss on foreign currency
transactions and balances - 160,360 - 128,707
Foreign exchange loss on foreign
currency loan 62,435 305,706 62,435 305,706
Provision for doubtful debts (note 26) 20,632 58,542 31,786 77,342
And after crediting:
Foreign exchange gain on loans 134,018 - 134,018 -
Inventory provision written back 183,277 - 183,277 -
Gain on disposal of property 9,637 1,426 9,637 1,426
Fair value gain on investment property
(note 21) 84,243 6,238,797 84,243 6,238,797
Interest income (note 11) 2,136 4,357 2,070 4,208
59

14. EXCHANGE (LOSS)/GAIN ON FOREIGN CURRENCY LOAN

The exchange (loss)/gain on the loan arises mainly from the valuation of the Japanese Yen denominated loan to Kenya Shillings at the
year-end which is on account of the movement in market rates. However, 50% (2016 – 50%) of the loan was swapped with a USD loan
(see note 23).
GROUP COMPANY
2017 2016 2017 2016
15. STAFF COSTS
Salaries and wages 2,443,518 2,456,058 2,434,087 2,444,783
Provision for staff gratuity (note 31) 330,037 211,364 329,770 211,303
Pension contributions 64,090 64,548 64,090 64,548
National Social Security Fund (NSSF) 3,029 3,918 3,029 3,918
2,840,674 2,735,888 2,830,976 2,724,552
16. TAXATION
(a) Taxation charge
Current tax based on the adjusted
profit for the year at 30% 6,947 7,023 6,947 7,023
Deferred taxation
- Credit for the year (note 33) (252,701) (729,966) (252,701) (729,966)
- On revaluation surplus of investment
properties 4,212 311,940 4,212 311,940
(248,489) (418,026) (248,489) (418,026)
(241,542) (411,003) (241,542) (411,003)
(b) Reconciliation of expected tax

based on accounting profit
to the tax charge
Accounting profit before taxation (1,712,903) 3,734,752 (1,674,501) 3,773,705

Tax at the applicable rate of 30% (513,871) 1,120,426 (502,350) 1,132,113
Tax effect of items not deductible
for tax purposes 48,103 100,823 48,103 100,823
Tax effect on varying tax rates 212,706 (1,643,937) 212,705 (1,643,937)
Deferred tax credit not recognised 11,520 11,685 - -
(241,542) (411,003) (241,542) (411,003)
(c) Taxation recoverable

At beginning of year 76,811 79,241 72,169 78,398
Charge for the year (note 16(a)) (6,947) (7,023) (6,947) (7,023)
Prior year under provision (note 16(a)) (5,281) - - -
Paid in the year 2,302 4,593 1,801 794
At end of year 66,885 76,811 67,023 72,169
60

17. (LOSS)/EARNINGS PER SHARE

(Loss)/earnings per share is calculated by dividing the (loss)/profit attributable to shareholders by the number of ordinary shares in
issue during the year.
GROUP COMPANY
2017 2016 2017 2016
(Loss)/earnings for purposes of basic
and diluted earnings per share (1,471,361) 4,145,755 (1,432,959) 4,184,708
Number of ordinary shares (thousands) 90,000 90,000 90,000 90,000
(Loss)/earnings per share basic and
diluted (Kshs) (16.35) 46.06 (15.92) 46.50
There were no potentially dilutive ordinary shares outstanding at 30 June 2017 or 30 June 2016. Therefore a diluted earnings per share
is the same as the basic earnings per share
61
62
18. PROPERTY, PLANT AND EQUIPMENT
(a) Year ended 30 June 2017
Computers, office
GROUP equipment,
Freehold Plant and Motor furniture and
land Buildings machinery vehicles Fittings Total
Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000
COST OR VALUATION
At 1 July 2016 360,325 1,228,399 7,509,746 866,870 152,760 10,118,100
Additions - - 72,733 8,913 2,668 84,314
Disposals - - - (55,859) - (55,859)
Transfer to Investment Property (46,800) - - - - (46,800)
Surplus/(deficit) on revaluation 48,475 32,601 (1,261,859) (443,371) (122,918) (1,747,072)
At 30 June 2017 362,000 1,261,000 6,320,620 376,553 32,510 8,352,683
COMPRISING
Valuation as at 30 June 2017 241,363 1,121,035 1,121,261 - - 2,483,659
Cost 120,637 139,965 5,199,359 376,553 32,510 5,869,024
At 30 June 2017 362,000 1,261,000 6,320,620 376,553 32,510 8,352,683
DEPRECIATION
At 1 July 2016 - 87,240 1,072,802 409,485 83,668 1,653,195
Charge for the year - 30,710 499,340 150,734 20,777 701,561
Depreciation adjustments 1,135 (137) 998
Eliminated on disposal - - - (35,888) - (35,888)
Written back on revaluation - (117,950) (1,572,142) (525,466) (104,308) (2,319,866)
At 30 June 2017 - - - - - -
NET CARRYING AMOUNT
At 30 June 2016 360,325 1,141,159 6,436,944 457,385 69,092 8,464,905
At 30 June 2017 362,000 1,261,000 6,320,620 376,553 32,510 8,352,683
The property, plant and equipment were revalued by Knight Frank Valuers Limited, registered valuers, as at 30 June 2017. The land was valued on an Open Market Value basis while the
other assets were valued on a Depreciated Replacement Cost basis. The group’s policy is to revalue property, plant and equipment at least once every three to five years (refer to note 3).
Properties owned by the group, Land Reference numbers 337/639, 8649, 9767 and 8786, and plant and machinery have been charged to secure loan facilities as disclosed under note 34.
18. PROPERTY, PLANT AND EQUIPMENT (Contd.)

(a) Year ended 30 June 2017 (contd.)
Computers, office
GROUP equipment,
ST OR VALUATION
At 1 July 2015 260,325 1,225,382 7,148,798 878,556 148,991 9,662,052
Additions 100,000 - 360,948 2,284 3,769 467,001
Transfer from Work in progress (note 19) - 3,017 - - - 3,017
Disposals - - - (13,970) - (13,970)
At 30 June 2016 360,325 1,228,399 7,509,746 866,870 152,760 10,118,100
COMPRISING:
Valuation as at 30 June 2013 192,888 1,088,434 2,383,120 206,506 - 3,870,948
Cost 167,437 139,965 5,126,626 660,364 152,760 6,247,152
At 30 June 2016 360,325 1,228,399 7,509,746 866,870 152,760 10,118,100
DEPRECIATION
At 1 July 2015 - 56,106 613,172 253,282 51,632 974,192
Eliminated on disposals - - - (8,474) - (8,474)
At 30 June 2016 - 87,240 1,072,802 409,485 83,668 1,653,195
NET CARRYING AMOUNT
At 30 June 2015 260,325 1,169,276 6,535,626 625,274 97,359 8,687,860
At 30 June 2016 360,325 1,141,159 6,436,944 457,385 69,092 8,464,905
63
64

(b) Year ended 30 June 2017
Computers, office
COMPANY equipment,
OST OR VALUATION
At 1 July 2016 360,325 1,228,399 7,509,746 863,470 152,579 10,114,519
Additions - - 72,733 8,913 2,668 84,314
Disposals - - - (52,250) - (52,250)
Transfer to Investment Property (46,800) - - - - (46,800)
Surplus/(deficit) on revaluation 48,475 32,601 (1,261,859) (443,371) (122,918) (1,747,072)
At 30 June 2017 362,000 1,261,000 6,320,620 376,762 32,329 8,352,711
COMPRISING
Valuation as at 30 June 2017 241,363 1,121,035 1,121,261 - - 2,483,659
Cost 120,637 139,965 5,199,359 376,762 32,329 5,869,052
At 30 June 2017 362,000 1,261,000 6,320,620 376,762 32,329 8,352,711
DEPRECIATION
At 1 July 2016 - 87,240 1,072,802 408,244 83,542 1,651,828
Depreciation adjustments - - - 1,136 - 1,136
Written back on revaluation - (117,950) (1,572,142) (525,466) (104,308) (2,319,866)
At 30 June 2017 - - - - - -
NET CARRYING AMOUNT
At 30 June 2016 360,325 1,141,159 6,436,944 455,226 69,037 8,462,691
At 30 June 2017 362,000 1,261,000 6,320,620 376,762 32,329 8,352,711
The property, plant and equipment were revalued by Knight Frank Valuers Limited, registered valuers, as at 30 June 2017. The land was valued on an Open Market Value basis while the
other assets were valued on a Depreciated Replacement Cost basis. The group’s policy is to revalue property, plant and equipment at least once every three to five years (refer to note 3).
Properties owned by the group, Land Reference numbers 337/639, 8649, 9767 and 8786, and plant and machinery have been charged to secure loan facilities as disclosed under note 34.

(b) Year ended 30 June 2017 (contd.)
Computers, office
COMPANY equipment,
OST OR VALUATION
At 1 July 2015 260,325 1,225,382 7,148,798 875,156 148,810 9,658,471
Additions 100,000 - 360,948 2,284 3,769 467,001
Transfer from work in progress (note 19) - 3,017 - - - 3,017
Disposals - - - (13,970) - (13,970)
At 30 June 2016 360,325 1,228,399 7,509,746 863,470 152,579 10,114,519
COMPRISING
Valuation as at 30 June 2013 192,888 1,088,434 2,383,120 206,506 - 3,870,948
Cost 167,437 139,965 5,126,626 656,964 152,579 6,243,571
At 30 June 2016 360,325 1,228,399 7,509,746 863,470 152,579 10,114,519
DEPRECIATION
At 1 July 2015 - 56,106 613,172 252,924 51,517 973,719
At 30 June 2016 - 87,240 1,072,802 408,244 83,542 1,651,828
NET CARRYING AMOUNT
At 30 June 2016 360,325 1,141,159 6,436,944 455,226 69,037 8,462,691
65

18. PROPERTY, PLANT AND EQUIPMENT (Continued)
(c) If the revalued property, plant and equipment were carried in the financial statements at historical cost, the balances at year-end
would have been as follows:

Computers
office
equipment,
land Buildings machinery vehicles fittings Total
30 June 2017
Cost 167,437 1,190,194 10,434,137 1,513,359 549,536 13,854,663
Accumulated
depreciation - (380,530) (5,603,390) (1,341,876) (513,076) (7,838,872)
Net carrying
amount 167,437 809,664 4,830,747 171,483 36,460 6,015,791
30 June 2016
Cost 167,437 1,190,194 10,208,793 1,504,446 546,868 13,617,738
Accumulated
depreciation - (352,407) (5,273,556) (1,237,025) (483,812) (7,346,800)
Net carrying
amount 167,437 837,787 4,935,237 267,421 63,056 6,270,938
(d) There were no additions made during the year under finance leases. Leased assets are pledged as security for the related finance
lease liabilities.
(e) Fair value hierarchy:
GROUP
As at 30 June 2017
Total
Level 1 Level 2 Level 3 fair value
Kshs ‘000 Kshs ‘000 Kshs ‘000 Kshs ‘000
Property, plant and equipment - 8,352,683 - 8,352,683
As at 30 June 2016
There were no transfers between Levels 1, 2 and 3 in the period.
66

18. PROPERTY, PLANT AND EQUIPMENT (Continued)

(e) Fair value hierarchy: (contd.)
COMPANY
As at 30 June 2017
Total
As at 30 June 2016
There were no transfers between Levels 1, 2 and 3 in the period.
The land was valued on an open market value basis while the other assets were valued on a depreciated replacement cost basis.
GROUP AND COMPANY

2017 2016
Kshs’000 Kshs’000
19. CAPITAL WORK-IN-PROGRESS
COST
At the beginning of the year 178,973 154,604
Additions 5,259 101,186
Impairment charge - (73,800)
Transfers to property, plant and equipment (note 18) 184,232 181,990

At end of the year - (3,017)
184,232 178,973
Work in progress mainly relates to costs incurred towards assembling a grate cooler for the kiln.
GROUP AND COMPANY

2017 2016
20. PREPAID OPERATING LEASES
COST
At the beginning and at the end of the year 12,877 12,877
AMORTISATION
At the beginning of the year 3,656 3,529
Charge for the year 105 127
At the end of the year 3,761 3,656
NET CARRYING AMOUNT

At end of the year 9,116 9,221
The Group and Company have entered into operating lease agreements for leasing of most of its land where it extracts limestone. These
leases have an average life of 952 years with a renewal option on expiry of the contract.
67

20. PREPAID OPERATING LEASES(Contd.)
Included in prepaid operating leases are three parcels of land measuring 7,071 acres, with low grade limestone deposits. Out of this land,
2,950 acres currently hold minable raw materials according to assessment by the Company’s Geologists. The 7,071 acre land parcels are
carried in the financial statements at cost despite the current material holding level. The fully mined portion of this land (4,121 Acres) has
a current market value of Kshs. 10.8 Billion according to valuation carried out by Knight Frank certified valuers, along with the valuation
of the other three investment properties held by the Company. The land parcels are adjacent to other two properties already classified as
investment properties.
21. INVESTMENT PROPERTIES

Investment properties relate to three pieces of leasehold land held by the Group under long-term lease arrangements and a freehold parcel
in Kikambala. The land was valued at Kshs 15.8 billion by Knight Frank Valuers Limited, accredited independent valuers, as at 30 June 2017.
The fair value was determined based on the comparable market approach that reflects the recent transaction prices for similar properties
and restrictions on use of parts of the properties due to invasion by squatters.
GROUP AND COMPANY

2017 2016
At the beginning of the year 15,736,956 9,498,159
Reclassified from freehold land (note 18) 46,800 -
Gain on fair value 84,243 6,238,797
At end of year 15,867,999 15,736,956
Parts of the investment properties are currently occupied by squatters. Court orders have in the past been granted in favour of the Group
and Company. The Group and Company continue to pursue several avenues to reclaim the occupied properties.
During the year, the directors assessed the use of some of the group’s properties and on this basis, reclassified one parcel held for capital
appreciation from freehold land to investment properties.
Fair value hierarchy:
GROUP AND COMPANY
As at 30 June 2017
Total
Investment properties - 15,867,999 - 15,867,999
There were no transfers between levels 1, 2 and 3 in the period.
GROUP AND COMPANY
As at 30 June 2016
Total
Investment properties - 15,736,956 - 15,736,956
There were no transfers between levels 1, 2 and 3 in the period.
The fair value was determined based on the comparable market approach that reflects the recent transaction prices for similar properties
and restrictions on use of parts of the properties due to invasion by squatters.
68

22. INVESTMENT IN SUBSIDIARY
Beneficial Country of 2017 2017

Company ownership incorporation Kshs’000 Kshs’000
The East African Portland Cement Company
Uganda Limited 100% Uganda 2,500 2,500
The principal activity of the subsidiary is the sale of cement purchased from the parent company.
All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly
by the parent company do not differ from the proportion of ordinary shares held. The subsidiary has not issued any preference shares.
23. LOAN SWAP
As part of its asset and liability management, the Group and Company use derivatives for hedging purposes in order to reduce its exposure
to foreign currency risks. This is done by engaging in currency swaps.
Currency swaps relate to contracts taken out by the group with a financial institution in which the group either receives or pays cross
currency to the financial institution. In a currency swap, the group pays a specified amount in one currency and receives a specified amount
in another currency. Currency swaps are mostly gross-settled.
The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities at year-end.
GROUP AND COMPANY

2017 2016
Assets
Cross currency swap 994,263 1,305,321
Liabilities
Cross currency swap 882,792 1,186,082
The group exchanged a Japanese Yen loan payable of JPY 1,461,280,000 for a US$ 18,409,754 equivalent resulting in a loss of Kshs
62,434,756 as at 30 June 2017 (2016 - loss of Kshs 103,270,000). The derivative instruments are carried in the books of account at fair
value. The swaps will mature on 20 March 2020.
GROUP AND COMPANY

2017 2016
24. DEPOSITS
Short-term deposits:
KCB Bank Kenya Limited 38,672 36,553
Restricted deposits:
Housing Finance Company Limited - 31,896
38,672 68,449
The short-term deposits mature within three months and the weighted average interest rate earned on the deposits at 30 June 2017
was 10.5% (2016 – 8.5%).
The deposits with Housing Finance Company Limited have been held as collateral for staff mortgages which was redeemed in March
2017. The weighted average interest rate earned on the deposits at 30 June 2017 was 2.37% % (2016 - 2.37%).
69

GROUP COMPANY
2017 2016 2017 2016
25. INVENTORIES

Consumables 1,895,737 2,131,916 1,895,737 2,131,916
Raw materials 115,165 138,740 115,165 138,740
Work-in-progress 12,149 17,351 12,149 17,351
Finished products 71,851 46,188 69,592 35,608
2,094,902 2,334,195 2,092,643 2,323,615
Provision for obsolete inventories (804,800) (988,077) (804,800) (988,077)
1,290,102 1,346,118 1,287,843 1,335,538
The cost of inventories recognised as an expense during the year in respect of continuing operations was Kshs 1.4 billion (2016: Kshs 2.4
billion).
No inventory was written off in the current year.
26. TRADE AND OTHER RECEIVABLES

GROUP COMPANY
2017 2016 2017 2016
Gross trade receivables 544,681 592,295 453,830 459,912

Impaired trade receivables (349,209) (328,577) (318,438) (286,652)
Net trade receivables 195,472 263,718 135,392 173,260
Staff receivables 86,473 115,714 86,237 115,665
Deposits, prepayments and
other receivables 119,805 146,142 104,699 110,527
401,750 525,574 326,328 399,452
Trade receivables are non-interest bearing. The average credit period on sales of finished goods is 24 days (2016 – 21 days). The bulk of
the trade receivables are covered by bank guarantees in favour of the group. For terms and conditions relating to related party receivables,
refer to note 27.
Deposits, prepayments and other receivables are unsecured, non-interest bearing and their carrying amounts approximate their fair value.
70

26. TRADE AND OTHER RECEIVABLES (Contd.)

As at 30 June, the aging analysis of trade receivables was as follows:
GROUP COMPANY
2017 2016 2017 2016
Neither past due nor impaired 130,688 178,800 90,520 121,406
Past due but not impaired
trade receivables:
Between 15 and 30 days 19,833 24,343 13,737 30,934
Between 31 and 60 days 30,875 20,920 21,385 20,920
Over 60 days 14,076 39,655 9,750 -

Total trade receivables not impaired 195,472 263,718 135,392 173,260
Impaired trade receivables 349,209 328,577 318,438 286,652

Gross trade receivables 544,681 592,295 453,830 459,912
The Group has provided for all receivables that are impaired. These receivables are over 120 days old. The movement in the provision for
credit losses is as set out below:
GROUP Trade Other

receivables receivables Total
Kshs’000 Kshs’000 Kshs’000
Year ended 30 June 2017

At the beginning of the year 328,577 62,601 391,178
Additions 20,632 - 20,632

At end of the year 349,209 62,601 411,810

Additions 79,265 8,089 87,354
Reversals (28,812) - (28,812)
At end of the year 328,577 62,601 391,178
COMPANY

Additions 31,786 - 31,786
At end of the year 318,438 62,601 381,039

Additions 69,253 8,089 77,342
At end of the year 286,652 62,601 349,253
71

27. RELATED PARTIES
Outstanding balances arising from transactions with related companies.
GROUP COMPANY
2017 2016 2017 2016
(a) Amount due from related parties:
The East African Portland Cement
Company Uganda Limited - - 350,397 402,139
Bamburi Cement Limited - 474 - 474
- 474 350,397 402,613
East African Portland Cement Uganda Limited is wholly owned subsidiary of The East African Portland Cement Company Limited. Bamburi
Cement Limited own 12.5% of the ordinary shares in East African Portland Cement Company Limited,Cementia Trading AG and Lafarge
SA own 14.6% of the ordinary shares in East African Portland Cement Company Limited .
The amount owing from Bamburi Cement Limited relates to deposits made by East African Portland Cement Company Limited for the
purchase of clinker as well as the use of the company’s clinic by Bamburi staff. No interest is charged on balances due from related
companies.
The following transactions were carried out with related parties during the year:-
(b) Transactions with related parties:
GROUP COMPANY
2017 2016 2017 2016
Sales to the East African Portland
Cement Uganda Limited - - 13,723 167,793
Purchase of clinker from
Cementia Trading AG and
Lafarge SA - 758,177 - 758,177
(c) Directors’ remuneration:
Fees for services as directors 1,100 1,008 1,100 1,008

Other emoluments 47,222 22,704 47,222 22,704
48,322 23,712 48,322 23,712
(d) Key management compensation:

Short-term employee benefits 80,717 81,902 80,717 81,902
Post-employment benefits 14,720 6,938 14,720 6,938
95,437 88,840 95,437 88,840
(e) Due to Government of Kenya:

Long-term loan 371,984 - 371,984 -
72

28. BANK AND CASH BALANCES

GROUP COMPANY
2017 2016 2017 2016

Bank balances 142,336 99,137 142,261 98,840
Cash on hand 9,350 30,181 2,429 6,099
151,686 129,318 144,690 104,939
Bank balances do not earn any interest.

29. SHARE CAPITAL AND RESERVES
(a) Share capital
Authorised:
126,000,000 shares of Kshs 5 each 630,000 630,000 630,000 630,000
Authorised, issued and fully paid:

90,000,000 shares of Kshs 5 each 450,000 450,000 450,000 450,000
(b) Share premium

The share premium is not distributable and represents the amounts above the par value of shares received by the company on issue of
ordinary shares.
(c) Asset revaluation reserve

The asset revaluation reserve is not distributable and is used to record increases in the fair value of property, plant and equipment and
decreases to the extent that such decrease in value relates to an increase in value on the same asset previously recognised in equity.
(d) Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements of the
foreign subsidiary, The East African Portland Cement Uganda Limited
GROUP AND COMPANY

2017 2016
30. DIVIDENDS PAID

Dividends payable at the beginning and at the end of the year 101,680 101,680
Payment of dividend is subject to withholding tax at the rate of 5% for resident and 10% for non-resident shareholders respectively.
31. STAFF GRATUITY
This represents outstanding obligations in respect of staff gratuity payable under the Collective Bargaining Agreement for unionisable staff
and staff on contract. The movement during the year was as follows:
GROUP COMPANY
2017 2016 2017 2016
Balance at the beginning of the year 1,088,970 1,035,653 1,088,696 1,035,346
Paid during the year (213,132) (158,047) (212,858) (157,953)
Provision for the year 330,037 211,364 329,770 211,303
At end of year 1,205,875 1,088,970 1,205,608 1,088,696
73

32. LONG - TERM LOANS
(a) Japanese Loan
The Overseas Economic Co-operation Fund of Japan (JICA) loan guaranteed by Kenya Government is denominated in Japanese Yen and is
repayable in 41 half yearly instalments by 20 March 2020 with interest accruing at 2.5% per annum. The principal loan balance as at year
end was – JPY 1,095,960,000 (2016 – JPY 1,461,280,000).
GROUP AND COMPANY

2017 2016
Loan principal 1,050,994 1,525,086
Accrued interest 3,641 4,811
As at end of year 1,054,635 1,529,897
(b) Asset Finance Loans
The interest rate during the year was at 10.5% (2016 - 10.5%). The loan was secured against the assets financed.
The group obtained an asset based finance loan of Kshs 175,000,000(2016: Kshs 323,636,000) from KCB Bank Kenya Limited at annual
interest rates of 15.3 %( 2016 – 15.3%).The asset based finance and composite working capital facilities are secured by an all asset
debenture over all the assets of the Company and a legal charge over certain properties owned by the company, Land Reference numbers
337/639, 8649, 9767 and 8786, and a fixed and floating debenture over the company’s assets to an aggregate value of Kshs 4,224,000,000.
GROUP AND COMPANY

2017 2016
Loans principal 1,187,001 1,363,067
Accrued interest - 393
As at end of year 1,187,001 1,363,460
(c) Maturity Analysis of Long Term Loans:
Japanese loan 1,054,635 1,529,897

Asset finance loans 1,187,001 1,363,460
Government Debt (note 27 (e)) 371,984 -
Insurance Premium Financing 25,004 -
Total loans 2,638,624 2,893,357
Less: repayable within one year (862,029) (716,751)
Repayable after one year 1,776,595 2,176,606
(d) Post Import Finance Loans
The Group purchased imported bulk raw materials at a cost of Kshs 563,493,000 (2016: Kshs 700,288,000) financed through a post import
finance facility from KCB Bank Kenya Limited. The interest rate during the year was at 15.3% (2016 – 15.3%). The loans are repayable
within 6 months and secured under the composite facility with KCB Bank Kenya Limited (refer to note 35).
GROUP AND COMPANY

2017 2016
As at end of year 308,878 -
74

32. LONG - TERM LOANS (Contd.)
(e) The borrowing costs capitalized in relation to construction and installation of qualifying assets during the year amount to Kshs Nil
(2016 – Kshs 62,510,041).
33. DEFERRED TAXATION
GROUP AND COMPANY 2017
Movements in deferred tax during the year were as follows:-

Through Other At 30
1 July profit or comprehensive June
2016 loss income 2017
Deferred tax liabilities

Property, plant and equipment 2,022,407 44,097 171,838 2,238,342
Investment properties 786,798 4,212 - 791,010
2,809,205 48,309 171,838 3,029,352
Deferred tax assets

Tax loss (business) (1,761,095) (293,823) - (2,054,918)
Provision for staff leave (26,363) 7,206 - (19,157)
Provision for staff gratuity (326,609) (35,074) - (361,683)
Inventories provision (4,184) (5,098) - (9,282)
Staff debts provision (18,780) (679) - (19,459)
Bad debts provision (185,185) (9,536) - (194,721)
Unrealised exchange loss (5,407) 40,205 - 34,798
(2,327,623) (296,799) - (2,624,422)
Balance as at end of year 481,582 (248,490) 171,838 404,930
GROUP AND COMPANY 2016
Deferred tax liabilities

Property, plant and equipment 2,067,265 (44,858) - 2,022,407
Investment properties 474,858 311,940 - 786,798
2,542,123 267,082 - 2,809,205
Deferred tax assets

Tax loss (business) (1,086,106) (674,989) - (1,761,095)
Provision for staff leave (32,769) 6,406 - (26,363)
Provision for staff gratuity (310,604) (16,005) - (326,609)
Inventories provision (59,140) 54,956 - (4,184)
Staff debts provision (16,353) (2,427) - (18,780)
Bad debts provision (137,223) (47,962) - (185,185)
Unrealised exchange loss (320) (5,087) - (5,407)
(1,642,515) (685,108) - (2,327,623)
Balance as at end of year 899,608 (418,026) - 481,582
75

GROUP AND COMPANY

2017 2016
34. BANK OVERDRAFT

KCB Bank Kenya Limited 2,069,634 1,606,770
The group has a composite working capital facility for bank overdraft, post import finance, letters of credit and guarantees with the KCB
Bank Kenya Limited. The approved limit as at year-end was
Kshs 2,030,000,000(2016:Ksh 1,800,000,000) and drawings against this facility attract interest at market rates. The composite working
capital facility and asset based finance facilities are secured by an all asset debenture over all the assets of the Company and a legal
charge over certain properties owned by the company, Land Reference numbers 337/639, 8649, 9767 and 8786, and a fixed and floating
debenture over the company’s assets to an aggregate value of Kshs 4,224,000,000.
GROUP COMPANY
2017 2016 2017 2016
35. TRADE AND OTHER PAYABLES

Trade payables 2,174,063 1,724,261 2,183,483 1,724,261
Other payables and accruals 643,460 777,044 639,965 775,065
Advance receipts from customers 36,469 35,614 36,470 35,614
Balance as at end of year 2,853,992 2,536,919 2,859,918 2,534,940
Trade and other payables are non-interest bearing. The average credit period on purchases is 80 days (2016 – 80 days). The group has
financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
GROUP AND COMPANY

2017 2016
36. DIVIDENDS PAYABLE

Dividend payable 101,680 101,680
76

37. STATEMENT OF CASH FLOWS
(a) Reconciliation of (loss)/profit before taxation to net cash (used in)/generated from operations
GROUP COMPANY
2017 2016 2017 2016
(Loss)/profit before taxation (1,712,903) 3,734,752 (1,674,501) 3,773,705
Adjustments for:
Depreciation (note 18) 701,561 687,477 700,900 686,583
Impairment charge on work in
progress (note 19) - 73,800 - 73,800
Amortisation on prepaid operating
leases (note 20) 106 127 106 127
Loss/(gain) on sale of property, plant
and equipment (9,637) 1,426 (9,637) 1,426
Fair value gain on investment
property (note 21) (84,243) (6,238,797) (84,243) (6,238,797)
Exchange (gain)/loss on foreign
currency loan (134,018) 305,706 (134,018) 305,706
Staff gratuity provision (note 31) 330,037 211,364 330,037 211,303
Interest expense
- Long term loan 30,740 18,986 30,740 18,986
- Bank overdraft 289,111 140,868 289,111 140,868
- Interest on lease obligations - 724 - 724
- Derivative instrument 44,102 57,672 44,102 57,672
- Asset finance loan 171,094 226,943 171,094 226,943
Interest income (2,136) (4,357) (2,070) (4,208)
Fair value loss on derivative
instrument 62,435 103,270 62,435 103,270
Working capital changes:
Decrease in inventories 56,016 510,164 47,695 506,421
Decrease/(increase) in trade and
other receivables 123,824 563,879 73,124 543,323
Decrease/(increase) in trade and other
payables 317,066 593,610 324,972 597,146
Decrease in bonus and legal fees - -
Increase in related party balances 474 - 52,216 (36,363)
Staff gratuity paid (note 31) (213,132) (158,047) (213,132) (157,953)
operations (29,503) 829,567 8,931 810,682
77

37. STATEMENT OF CASH FLOWS (Contd.)

GROUP COMPANY
2017 2016 2017 2016
(b) Movement in loans
(i) Japanese loan
Foreign currency exchange loss/(gain) (134,018) 305,706 (134,018) 305,706
Repayments during the year (338,856) (325,944) (338,856) (325,944)
Balance at end of year 1,050,994 1,523,868 1,050,994 1,523,868
Payment of swap loans (547,488) (326,205) (547,488) (326,205)
Receipt from swap asset 579,701 268,645 579,701 268,645
Total loan repayment (306,643) (383,504) (306,643) (383,504)
(ii) Asset finance loans
Receipts during the year 175,000 323,636 175,000 323,636
Repayment of asset finance loan (351,065) (425,324) (351,065) (425,324)
Balance at end of year 1,187,001 1,363,066 1,187,001 1,363,066
(iii) Post import finance loans
Balance at the beginning of the year - 300,906 - 300,906
Receipts during the year 563,493 700,288 563,493 700,288
Repayments during the year (254,614) (1,001,194) (254,614) (1,001,194)
Balance at end of year 308,879 - 308,879 -
(c) Interest paid on borrowings
Balance at the beginning of the year 4,811 5,102 4,811 5,102
Interest charge on long–term loan 30,740 18,986 30,740 18,986
Accrued as at 30 June (note 32) (3,641) (4,811) (3,641) (4,811)
Interest paid on long–term loan 31,910 19,277 31,910 19,277
Interest paid on overdraft 289,111 140,868 289,111 140,868
Interest paid on asset finance loan 171,094 237,039 171,094 237,039
Interest paid on lease obligations - 3,879 - 3,879
Interest on loan swap liabilities 44,102 69,916 44,102 69,916
Interest paid on borrowings 536,217 470,979 536,217 470,979
(d) Movement in lease obligations
Balance at the beginning - 16,331 - 16,331
Repayments during the year - (16,331) - (16,331)
Balance at end of the year - - - -
(e) Analysis of cash and cash equivalents
Short term deposits (note 24) 38,672 36,553 38,672 36,553
Bank and cash balances (note 28) 151,686 129,318 144,690 104,939
Bank overdraft (note 35) (2,069,634) (1,606,770) (2,069,634) (1,606,770)
(1,879,276) (1,440,899) (1,886,272) (1,465,278)
78

38. RETIREMENT BENEFITS OBLIGATIONS
The Group, with effect from 1 July 2006, operates a defined contribution pension scheme for senior and supervisory staff. The scheme was
previously a non-contributory defined benefits pension scheme. The scheme is administered independently by Zamara Kenya (formerly
known as Alexander Forbes Financial Services (E.A) Limited), while its investments are managed by Stanbic Investments Services (East
Africa) Limited. Contributions to this scheme during the year amounted to Kshs 64,089,942 (2016 – Kshs 64,544,000).
The Group also operates an in-house gratuity scheme for unionisable employees. Contributions to this gratuity scheme are governed by a
collective bargaining agreement that is reviewed triennially and was last reviewed on 30 June 2013. These contributions are not invested or
managed as a separate fund, but are self-funded and are fully provided for in the group financial statements.
The Group also contributes to the statutory defined contribution pension schemes in Kenya and Uganda, the National Social Security
Funds. Contributions to the statutory schemes are determined by statute in the respective countries and are limited to specific contributions
legislated from time to time. The group’s contributions are charged to profit or loss in the year to which they relate. Contributions to these
schemes during the year amounted to Kshs 3,029,200 (2016 – Kshs 3,688,000).
39. REVENUE ANALYSIS AND SEGMENTAL REPORTING

2017 2016
The group revenues are derived from sales in the following markets:
Local market – Kenya 6,923,749 8,651,474
Regional market (East Africa) 4,558 219,982
6,928,307 8,871,456
Sales to the regional market are done through the wholly owned subsidiary, The East African Portland Cement Uganda Limited, whose net
assets constitute less than 5% of the group’s total net assets. Segment reporting with respect to net assets is, therefore, not considered of
any real value. In addition, the local sales are 99 % (2016 – 98%) of the total revenue hence there is only one reportable segment.
40.CAPITAL MANAGEMENT
The Group manages its capital to ensure that it will be able to continue as a going concern while optimising the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes borrowings,
cash and cash equivalents and equity attributable to equity holders, comprising issued capital and retained earnings. Consistent with others
in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net
debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity plus net debt. The Group does not
have a gearing ratio target and it is not subject to any imposed capital requirements.
The constitution of capital managed by the group is as follows:
GROUP COMPANY
2017 2016 2017 2016
Equity(i) 16,890,983 17,946,760 17,153,710 18,185,715
Debt (ii) 2,947,503 2,893,357 2,947,503 2,893,357
Add: cash and cash equivalents
(note 37(e)) 1,879,276 1,440,899 1,886,272 1,465,278
Net debt 4,826,779 4,334,256 4,833,775 4,358,635
Gearing ratio 29% 24% 28% 24%
(i) Equity includes all capital and reserves of the group that are managed as capital.
(ii) Debt is defined as long term and short term borrowings, post import finance and obligations under finance leases (excluding
derivatives as described in note 23).
79

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s activities expose it to a variety of financial risks, including credit risk and the effects of changes in debt and equity market prices,
foreign currency exchange rates and interest rates. The Group’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on its financial performance.
Risk management is carried out by the finance/internal audit department under policies approved by the Board of Directors. The
finance/internal audit department identifies, evaluates and mitigates financial risks. The board provides written principles for overall risk
management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, use of non
derivative financial instruments and investing excess liquidity.
The Group has policies in place to ensure that sales are made to customers with an appropriate credit history.
Credit risk
Credit risk arises from trade and other receivables, cash and cash equivalents, deposits with banks and amounts due from related parties.
The Group management assesses the credit quality of each customer, taking into account its financial position, past experience and other
factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The utilisation of credit
limits is regularly monitored.
Before accepting any new customer, the Group uses a credit scoring system to assess the potential customer’s credit quality and defines
credit limits by customer. Limits and scoring attributed to customers are reviewed twice a year.
In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large
and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for credit losses
already recognized.
The amount that best represents the Group’s and Company’s maximum exposure to credit risk is made up as follows:
Neither past due Past due but
nor impaired not impaired Impaired Total
GROUP
At 30 June 2017
Trade receivables 169,668 25,804 349,209 544,681
Amount due from related party - - - -
Bank balances 151,686 - - 151,665
Deposits 38,672 - - 38,672
At 30 June 2016
Amount due from related party - 474 - 474
Bank balances 99,137 - - 99,137
Deposits 68,449 - - 68,449
COMPANY
At 30 June 2017
Amount due from related parties - 18,188 - 18,188
Bank balances 144,690 - - 144,690
Deposits 38,672 - - 38,672
At 30 June 2016
Amount due from related parties - 402,613 - 402,613
Bank balances 98,840 - - 98,840
Deposits 68,449 - - 68,449
80

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Contd.)
The customers under the fully performing category are paying their debts as they continue trading. The debt that is overdue is not impaired
and continues to be paid. The finance department is actively following these debts. The impaired debt has been fully provided for. As at
30 June 2017 the Group held bank guarantees amounting to KSh 417,899,000 against trade receivables. There was no concentration risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management
framework for the management of the group’s short, medium and long term funding and liquidity management requirements. The group
manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables analyse the group’s and company’s financial liabilities that will be settled on a net basis into relevant maturity groupings
based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table below are the
contractual undiscounted cash flows.
Up to 1 – 3 3 – 12 1 – 5
1 month Months Months years Total
Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000
GROUP
At 30 June 2017
Financial assets
Trade receivables 283,627 118,123 - - 401,750
Amount due from related party - - - - -
Bank balances and cash 151,686 - - - 151,686
Loan swap asset - 129,520 127,868 736,874 994,262
Deposits 38,672 - - - 38,672
Total financial assets 473,985 247,643 127,868 736,874 1,586,370
Financial liabilities
Trade and other payables 847,489 1,019,526 307,048 - 2,174,063
Borrowings:
- Long term loan - 231,432 228,480 1,316,683 1,776,595
- Loan swap liability - 119,596 116,816 646,380 882,792
- Asset finance loan 32,597 112,639 415,376 590,004 1,150,616
- Bank overdraft 2,069,634 - - - 2,069,634
Total financial liabilities 2,949,720 1,483,193 1,067,720 2,553,067 8,053,700
Net liquidity gap (2,475,735 (1,235,550) (939,852 (1,816,193) (6,467,330)
At 30 June 2016
Financial assets
Amount due from related party - 474 - - 474
Loan swap asset - 98,931 97,669 562,843 759,443
Deposits 36,553 - - - 36,553
81

Liquidity risk(Contd. )
Up to 1 – 3 3 – 12 1 – 5
Trade and other payables 539,452 989,364 195,445 - 1,724,261
Borrowings:
- Long term loan - 197,861 195,337 1,125,686 1,518,884
- Loan swap liability - 141,165 137,883 762,952 1,042,000
- Asset finance loan 50,980 176,162 649,630 922,741 1,799,513
- Bank overdraft 1,606,770 - - - 1,606,770
Net liquidity gap (1,617,836) (1,226,347) (1,080,626) (2,248,536) (6,173,345)
Up to 1 – 3 3 – 12 1 – 5
COMPANY
At 30 June 2017
Financial assets
Amount due from related party - 350,397 - - 350,397
Loan swap asset - 129,520 127,868 736,874 994,262
Deposits 38,672 - - - 38,672

Trade and other payables 848,098 1,028,117 307,268 - 2,183,483
Borrowings:
Long term loan - 231,432 228,480 1,316,683 1,776,595
Loan swap liability - 119,596 116,816 646,380 882,792
Asset finance loan 32,597 112,639 415,376 590,004 1,150,616
Bank overdraft 2,069,634 - - - 2,069,634
Net liquidity gap (2,566,606) (885,359) (940,072) (1,816,193) (6,208,230)
At 30 June 2016
Financial assets
Amount due from related party - 402,613 - - 402,613
Loan swap asset - 98,931 97,669 562,843 759,443
Deposits 36,553 - - - 36,553
82

Liquidity risk(Contd. )
Trade and other payables 539,452 989,364 195,445 - 1,724,261
Borrowings:
Long term loan - 197,861 195,337 1,125,686 1,518,884
Loan swap liability - 141,165 137,883 762,952 1,042,000
Asset finance loan 50,980 176,162 649,630 922,741 1,799,513
Bank overdraft 1,606,770 - - - 1,606,770
Net liquidity gap (1,773,798) (825,008) (1,080,626) (2,248,536) (5,927,968)
Market risk
(i) Foreign exchange risk
The group undertakes certain transactions denominated in foreign currencies. Exchange rate exposures are managed within approved
policy parameters.
The carrying amounts of the group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows:
UShs US$ JPY

Kshs’000 Kshs’000 Kshs’000
30 June 2017
Assets
Bank and cash balances 5,151 1,712 -
Loan swap asset - - 994,263
Trade receivables and other
receivables 74,135 9,425 -
79,286 11,137 994,263
Liabilities
Borrowings - - 1,504,635
Loan swap liability - 882,792 -
Trade and other payables - 29,245 -
- 912,037 1,504,635
30 June 2016
Assets
Bank and cash balances 12,226 12,373 -
Loan swap asset - - 1,305,321
Trade receivables and other
receivables 126,122 12,712 -
138,348 25,085 1,305,321
Liabilities
Borrowings - - 1,529,897
Loan swap liability - 1,186,082 -
Trade and other payables - 28,553 -
- 1,214,635 1,529,897
83

Market risk (Contd.)

(i) Foreign exchange risk (Contd.)
Foreign exchange risk – Appreciation/depreciation of Kenya shilling against other currency by 5%
The following sensitivity analysis shows how profit and equity would change if the market risk variables had been different on the reporting
date with all other variables held constant.
GROUP AND COMPANY

2017 2016
Kshs’ 000 Kshs’ 000 Kshs’ 000 Kshs’ 000
Effect on Effect Effect Effect
profit on equity on profit on Equity
Currency – Ugandan shillings
+ 5% Kshs movement 7,043 8,578 6,917 7,545
- 5% Kshs movement (7,043) (8,578) (6,917) (7,545)
Currency - US dollars
+ 5% Kshs movement 64,247 64,247 59,748 59,748
- 5% Kshs movement (64,247) (64,247) (59,748) (59,748)
Currency – JPY
+ 5% Kshs movement 14,248 14,248 11,229 11,229
-5% Kshs movement (14,248) (14,248) (11,229) (11,229)
(ii) Interest rate risk
Interest rate risks arise from fluctuations in the bank borrowing rates. The interest rates vary from time to time depending on the prevailing
economic circumstances. To minimise the exposure, the group has negotiated a fixed interest rate on the borrowings. The group closely
monitors the interest rate trends to minimize the potential adverse impact of interest rate changes. The table below summarises the exposure
to interest rate risk at the reporting date.
Included in the tables below are the group’s and company’s financial instruments at carrying amounts, categorized by the earlier of
contractual repricing or maturity dates.
Up to 1-3 3-12 1-5 Over
1 month Months Months Years 5 years Total
At 30 June 2017
Assets
Deposits - - - - - -
Liabilities
Borrowings 23,364 85,144 338,730 501,468 - 948,707
Bank overdraft - - 2,069,634 - -
2,069,634
At 30 June 2016
Assets
Deposits - - 31,896 - - 31,896
Liabilities
Borrowings 33,576 122,358 486,780 720,646 - 1,363,360
Bank overdraft - - 1,606,770 - -
1,606,770
84

Market risk (Contd.)

(ii) Interest rate risk(contd.)
Interest rate risks – Increase / decrease of 5% in net interest margin
The following sensitivity analysis shows how profit and equity would change if the market risk variables had been different on the reporting
date with all other variables held constant.
2017 2016
Kshs’ 000 Kshs’ 000 Kshs’ 000 Kshs’ 000
Effect on Effect Effect Effect
profit on equity on profit on Equity
+5% Movement (34,587) (34,587) (18,263) (18,263)

-5 % Movement 34,587 34,587 18,263 18,263
(iii) Fair values of financial instruments
The group had financial instruments whose subsequent measurement is at fair value.
Below follows required disclosure of fair value measurements, using a three-level fair value hierarchy that reflects the significance of the
inputs used in determining the measurements. It should be noted that these disclosure only cover instruments measured at fair value.
Level 1
Included in level 1 category are financial assets and liabilities that are measured in whole or in part by reference to published quotes in an
active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring
market transactions on an arm’s length basis.
Level 2
Included in level 2 category are financial assets and liabilities measured using inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). For example, instruments
measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions
are categorised as level 2.
Financial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable
current market transactions are assets and liabilities for which pricing is obtained via pricing services, but where prices have not been
determined in an active market, financial assets with fair values based on broker quotes, investments in private equity funds with fair values
obtained via fund managers and assets that are valued using the Group’s own models whereby the majority of assumptions are market
observable.
Level 3
Financial assets and liabilities measured using inputs that are not based on observable market data are categorised as level 3. Non market
observable inputs means that fair values are determined in whole or in part using a valuation technique (model) based on assumptions
that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available
market data. The main asset classes in this category are unlisted equity investments and limited partnerships. Valuation techniques are
used to the extent that observable inputs are not available, thereby allowing for situations for which there is little, if any, market activity for
the asset or liability at the measurement date. However, the fair value measurement objective remains the same, that is, an exit price from
the perspective of the Group.
Therefore, unobservable inputs reflect the Group’s own assumptions about the assumptions that market participants would use in pricing
the asset or liability (including assumptions about risk). These inputs are developed based on the best information available, which might
include the Group’s own data.
85

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
GROUP AND COMPANY
At 30 June 2017
Total
Financial assets designated

at fair value through
profit and loss
Loan swap asset - 994,263 - 994,263
Financial liabilities designated

profit and loss
Long term loans - 1,776,595 - 1,776,595
Loan swap liabilities - 882,792 - 882,792
Total financial liabilities - 2,659,387 - 2,659,387
At 30 June 2016

Financial assets designated
profit and loss
Loan swap asset - 1,305,321 - 1,305,321
Financial liabilities designated

profit and loss
Long term loans - 2,893,357 - 2,893,357
Loan swap liabilities - 1,186,082 - 1,186,082
Total financial liabilities - 4,079,439 - 4,079,439
86

GROUP AND COMPANY

2017 2016
42. CONTINGENT LIABILITIES
Employment & labour relations case 1,100,000 1,100,000

Tax assessment 473,000 473,000
Pending law suits 373,300 373,300
Guarantee of staff mortgages - 31,311
Pending sale of land to Superior Homes case. 440,796 -
2,387,096 1,977,611
Pending law suits relate to legal proceedings involving the company for breach of contracts. However, in the opinion of the directors, no
liability is likely to crystallise.
The Guarantees of staff mortgages are secured by deposits with Housing Finance Company Limited held as collateral for staff mortgages
and reported in the financial statements as restricted deposits as disclosed on note 24. The liability will only crystallize if the staff default on
the secured mortgages.
Employment & labour relations court cause No.2119 of 2016
The Kenya Chemical and Allied Workers Union (KCAAWU) had filed a case against the Company allegedly for non-implementation of
Collective Bargaining Agreement (CBA) terms to contract staff. The Company’s contract staffs have in the past not been covered under
the Collective Bargaining Agreement and management has had different mutual payment arrangements with them. The industrial court
delivered a ruling on the 6th of July 2016 which noted that the claimant’s case had merit and ordered that the company implements the
collective bargaining agreement to include contract staff. The judge however noted that where there are problems of implementation for
the reasons that the award is unsustainable, the company should renegotiate the implementation process for purposes of reaching an
amicable settlement beneficial to all parties.
The Company has assessed the financial impact of the court award in the negotiated CBA for period 1st August, 2012 to 30th July, 2016 and
this translates to an additional staff cost of Kshs 1.1 billion, an amount which is considered unsustainable.
The Company has obtained a stay of the award from the court and at the same time continues to engage with the union on possibility of
amicably resolving the issue. In case this negotiation fails to yield an amicable settlement, the matter will be progressed through the next
legal avenue until determined. Accordingly no provision has been made in these financial statements for the award
The group has placed deposits with Housing Finance Company Limited as collateral for staff mortgages (see note 24). The liability would
only crystallise if a staff member defaults on their mortgage payments.
Tax Assessment
The Kenya Revenue Authority (KRA) carried out an audit of the company covering corporate tax, employee taxes, withholding tax and VAT
for the period from 2005 to 2008 and raised an assessment on the company of Kshs 2.5 billion on the tax heads mentioned above. Out of
this assessment, Kshs 1.7 billion has been solved with the tax authorities. The company has paid Kshs 122 million and appealed against
a further Kshs 473 million through the Local Committee, which subsequently ruled in favour of the company. KRA however filed a notice
to appeal in the High Court against the Local Committee ruling. The substantive appeal to the High Court has however not been filed by
KRA. Consequently, no provision has been made for any tax liability that may arise from this assessment in these Consolidated Financial
Statements.
87

42. CONTINGENT LIABILITIES (Contd.)
Land and Environment Court case cause 931 of 2013
The Company had filed a contest in the court of appeal challenging an extension of execution of a consent entered between the Company
and Superior homes on the sale of 337 acres of land to be hived off from parcel Land Reference Number 8784/4. In the Company
perspective, Superior Homes had defaulted on the provisions of the consent by not providing an acceptable Bank security within the period
of the consent. Superior homes challenged this matter in the High court in 2013 and was granted a favorable ruling extending the execution
period by 120 days from the date of the ruling. This is the ruling the Company contested in the court of appeal.
The Company lost the appeal and the court affirmed the execution period to be 120 days from the date of the ruling. The ruling noted
existence of conditions which were to be met by the Company to facilitate the sale given its status as a State Corporation.
The Company has assessed the financial impact of the court ruling allowing 120 days for execution, which would result in disposal of the
337 acres at a price of Kshs. 2.226 million per acre (agreed on in year 2012) against the carrying value of the parcel at Kshs. 3.534 million
per acre. If executed, this transaction shall translate to an impairment of the 337 acre portion by Kshs. 440.796 million (Kshs. 1.308 million
per acre). The liability will only crystallize when the sale is executed per the consent entered into and when the required sanctions are
provided.
The Company plans to progress the matter to the next legal avenue given the public interest tied to the State Corporation. Execution of
the sale can only be finalized with the approval of the parent ministry and the cabinet, a change in policy that occurred way after the initial
option granted to Superior Homes.
2017 2016
43. CAPITAL COMMITMENTS

Authorised by the directors but not contracted for 1,003,888 2,564,817
Authorised by the directors and contracted for 36,022 64,352
44. OPERATING LEASE RENTALS
The group has entered into operating lease agreements for leasing of most of its depots. These leases have an average life of between 12
months to 36 months with a renewal option on expiry of the contract.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
2017 2016
Within 1 year 23,862 25,758

Later than 1 year but not later than 2 years 22,938 24,761
46,800 50,519
45. COUNTRY OF INCORPORATION
The company is incorporated and domiciled in Kenya under the Companies Act and is listed on the Nairobi Securities Exchange.
46. CURRENCY
These financial statements are presented in thousands of Kenya Shillings (Kshs ‘000).
47. EVENTS AFTER THE REPORTING DATE
No material events or circumstances have arisen between the reporting date and the date of this report.
88
N OT I C E O F T H E A N N U A L G E N E R A L M E E T I N G
TO A L L S H A R E H O L D E R S
T H E E A ST A F R I C A N P O RT LA N D C E M E N T C O M PA N Y L I M I T E D
NOTICE is hereby given that the 85th Annual General Meeting of the Company will be held at the Company’s Club House, Athi River on
Friday 15th December 2017 at 12 noon to transact the following business:-
AGENDA
1. To read the notice convening the meeting, table proxies and to confirm the presence of a quorum.
2. To confirm the minutes of the 84rd Annual General Meeting held on 22nd February 2017.
3. To receive the Chairman’s report.
4. To receive, consider and adopt the Financial Statements for the year ended 30th June 2017 together with the reports of the Directors
and Auditors thereon.
5. To note that the Directors do not recommend payment of a dividend in respect of the financial year ended 30 June 2017
6. To re-elect Mr. Kungu Gatabaki as a Director of the Company who retires at this meeting in accordance with Article 98 and 99 of the
Company’s Articles of Association, and being eligible, offers himself for re-election.
7. To re-elect Professor Sarone ole Sena as a Director of the Company who retires at this meeting in accordance with Article 98 and 99
of the Company’s Articles of Association, and being eligible, offers himself for re-election.
8. To re-elect the National Social Security Fund, represented by Dr. Anthony Omerikwa, as a Director of the Company which retires
at this meeting in accordance with Article 98 and 99 of the Company’s Articles of Association, and being eligible, offers itself for re-
election.
9. To approve the appointment of the National Social Security Fund, represented by Dr. Anthony Omerikwa, Kungu Gatabaki, Professor
Sarone ole Sena and Henry Rotich as members of the Board Audit Committee in line with the requirements of Section 769 of the
Companies Act, 2015.
10. To approve the remuneration of the Directors as shown in the Financial Statements for the year ended 30 June 2017.
11. To note that the audit of the Company’s book of accounts will continue to be undertaken by the Auditor-General or an audit firm
appointed in accordance with Section 11 of the State Corporations Act (as amended by the Miscellaneous Law Amendment Act,
2002), and Sections 14 and 39 (i) of the Public Audit Act, 2003.
SPECIAL BUSINESS
12. To change the name of the Company from ‘The East African Portland Cement Company Limited’ to ‘East African Portland Cement
PLC’ with effect from the date set out in the certificate of change of name issued in that regard by the Registrar of Companies.
13. To transact any other business of an annual general meeting of which due notice has been received.
By Order of the Board
SHEILA KAHUKI
COMPANY SECRETARY
20th November 2017
Note:- A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote on his or her behalf. A proxy
need not be a member of the Company.
89
N OT E S
90
N OT E S
91
N OT E S
92
THE EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED
P R OX Y FO R M
I/WE
OF
Being a member of the above Company, hereby appoint:
OF
Whom failing
OF
Or failing him, the Chairman of the Meeting, my/our proxy, to vote for me/us and my/our behalf at the Annual General Meeting of the
Company to be held Friday, 8th December 2017 at noon and at any adjournment thereof.
As witness my/our hand this day of 2017
Signed
Signed
Note:
1. A member entitled to attend and vote is entitles to appoint a proxy to attend and vote in his stead and a proxy need not be a
member of the Company
2. In the case of a member being a Limited Company this form must be completed under its common seal or under the hand of
an officer or attorney duly authorized in writing
3. Proxies must be in the hands of the Secretary not later than 48hours before the time of holding the meeting
93
94
EAPCC DEPOTS
Eldoret – Forest Road Off Uganda Road next to Paul’s Bakery
Kakamega – Paulina House, Mumias Road opposite the Mosque
Bungoma – Adams Building, Mumias Road Next to G4S Building
Nairobi – Rapid Kate Complex, Mombasa Road opposite Cabanas Stage
Kisumu – Along Obote Road opposite KWAL Depot
Nyahururu – Mbaria Conference, Kimathi Street behind Spear Supermarket
VIRTUAL DEPOTS
Naivasha General Masters Pasha Enterprises Makutano Stores Citlink Hardware

Naivasha town Machakos Town Matuu Town Olkalou Town,
Patrick - 0722301424 Peter - 0728661875 Moses -0723285276
Jane - 0720322164
Speedcom Enterprises Ltd The Option Double Kei Transporters& Friwak Business Solutions
Kiambaa Town, Waiyaki Way Distributors Gen Githunguri Town, Kiambu
Simon - 0722360455 Keria, Chogoria Karatina Town Margaret - 0722608346
Munene -0720764030 James - 0720955422
Franel Development Co Triscan Solutions Mwaminifu Hardware Huruma Stores (Luka

Githurai Town, Nairobi Kiambaa Town, Ngara, Nairobi Gikunda)
Maina - 0722899417 Waiyaki Way Charles - 0721707995 Nkubu, Meru
Vincent - 0721385582 Luka - 0724859706
Genesis Chuma Cement Masters Tulip Hardware & Timber Saris Hardware
Hardware Ltd Kenya Ltd, Thika Utawala, Embakasi Kitengela
Zimmerman, Nairobi Nairobi Maingi - 0720070544
Mansukh - 0722400060
Paul - 0721922106 Serah - 0725407134
Magic Stores
Hardware Ltd.
Nkoroi Market Past
Ongata Rongai
Muigai - 0721639980
95
Phone: +254 709 855 000 E-mail: [email protected]
FaceBook: East African Portland Cement Co
Twitter : @EAPCC
Instagram: eastafricanportlandcement

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EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT 2016/2017

BUILDING the NATION

OUR VISION OUR MISSION

Move fast with stable infrastructure

4 Financial Review Financial Statements:

7 Corporate Information 42 Consolidated and Company Statements of

11 Chairman’s Statement 43 Consolidated Company Statements of

30 Report of the Auditor General 89 Notice of the Annual General Meeting

FIVE YEAR FINANCIAL HIGHLIGHTS

Profitability and Efficiency Ratios

Net Debt Equity

Percentage Shareholding as at 30th June 2017

6 National Social Security Fund

Stanbic Bank Limited Standard Chartered Bank Uganda Limited

Equity Bank Limited KCB Bank Uganda Limited

William Lay Henry Kiplagat Rotich EGH,

Simon Peter Ole Nkeri Patrick Nduati Mwangi

Kungu Gatabaki Dr. Anthony Omerikwa

It is my pleasure to present to you the Annual Report and Financial

The building and construction sector posted a growth rate of 9.2%

Investment Property Valuation

CHAIRMAN’S STATEMENT Contd.

Financial and Business Performance

Cement production for the Company declined by 16%

Selling and distribution costs reduced by 56% as a result

The Company’s investment property, consisting

MANAGING DIRECTOR’S STATEMENT Contd.

MANAGING DIRECTOR’S STATEMENT Contd.

MANAGING DIRECTOR’S STATEMENT Contd.

EAPCC’s managerial decision making increasingly takes into account

EAPCC’s sustainability pillars:

Community Development and Economic Advancement

SUSTAINABILITY REPORT (Contd.)

Rift Valley and the Coastal Region

EAPCC Chairman of the Board of Directors, William Lay hands over a

During the reporting period, Joyful Women Organization (JOYWO),

SUSTAINABILITY REPORT (Contd.)

Employees and the Workplace

In order to ensure sustained compliance with environmental

CORPORATE GOVERNANCE STATEMENT

Introduction Public Secretaries of Kenya. She supports the Board on procedural

Responsibilities of the Board NSSF 4 7 1

CORPORATE GOVERNANCE STATEMENT (Contd.)

CORPORATE GOVERNANCE STATEMENT (Contd.)

Internal controls Skills and experience of the Board

The Company’s business is conducted within a developed control Conflict of Interest

Relations with shareholders Communication

GROUP FINANCIAL RESULTS

Loss before taxation (1,712,903)

Taxation credit 241,542

Loss for the year charged to retained earnings (1,471,361)

ENHANCED BUSINESS REVIEW

Corporate social responsibility

DISCLOSURE OF INFORMATION TO AUDITORS

By Order of the Board

THE DIRECTOR’S REMUNERATION POLICY AT A GLANCE

There will be no changes to these policies in the next financial year.

Directors Contract of service

DIRECTORS CONTRACT OF SERVICE