East African Portland Cement’s factory in Athi River (EAPCC). FILE PHOTO | NMG
NAIROBI, Kenya Nov 13 – Cash-strapped cement maker East African Portland Cement Company (EAPCC) has failed to meet its tax obligations for the year ended June 30, 2021.
According to the firm’s annual report, Auditor General Nancy Gathungu revealed that the company owes Kenya Revenue Authority(KRA) over Sh2.9 billion in tax arrears.
The company owes a total of Sh2.2 billion in Pay as You Earn (PAYE), Value Added Tax (VAT) of Sh656 million and pension liabilities stood at Sh110 million, being the principal, penalties and interests.
“This is contrary to the Income Tax Act which requires employers to deduct PAYE at source and remit the same to the tax authorities before the ninth day of the subsequent month of pay. As a result of the default, the company is likely to suffer additional tax penalties and interest. Consequently, the company is in breach of the law,” the Auditor-General said.
Moreover, the firm is also facing litigation and claims against it as employees claim Sh1.5 billion of unpaid salaries while suppliers are demanding Sh310 million for unpaid bills of goods delivered and services rendered.
“These events or conditions, along with other matters, indicate that a material uncertainty exists that casts significant doubt on the Group’s and Company’s ability to continue as a going concern,” Gathungu said.
She also revealed that the company also defaulted on a loan from one of its key lenders, forcing it to dispose of some of its idle lands to retire the debt.
“The cement production plant continues to operate significantly below capacity due to working capital constraints, lack of essential spare parts and loss of market share to competitors,” Gathungu noted.
In the period under review, the company announced that it returned to profitability posting a net profit of Sh1.8 billion compared to a loss of Sh2.7 billion. It also cut its permanent staff by 78 percent in the period under review to 59 from 268.