Bamburi Cement Ltd. (Bamburi Cement) is a Kenya based cement production company. Bamburi Cement, through its subsidiaries is primarily engaged in the manufacture and sale of cement and cement related products, which include the Portland cement, Portland pozzolana cement and Portland limestone cement. The companyÂ´s products are marketed under various brand names which include Power Plus Cement, Nguvu Cement, Supaset, Multi Purpose and Plasta Plus. Bamburi Cement also owns and manages a world class nature and environmental park that was developed from the rehabilitation quarries. The company has its operations in Kenya and Uganda. The company is headquartered at Nairobi, Kenya. In this study, Bamburi Cement has used the total debt-to-assets (or debt-to-capital employed) as a measure of its capital structure. Total debt includes interest bearing long-term and short-term debt. Assets include fixed assets and those current assets that are financed by debt. This paper is divided into several sections namely; Definition of Capital Structure; Rajan and Zingales (1995) argue that the definition of capital structure would depend on the objective of the analysis. For example, for agency-problem related studies, capital structure maybe measured by total debt-to-firm value ratio., Relevance of Capital Structure; The prevailing argument, originally developed by Modigliani and Miller (1958), is that an optimal capital structure exists which balances the risk of bankruptcy with the tax savings of debt.Â Once established, this capital structure should provide greater returns to stockholders than they would receive from an all-equity firm. Evaluation of the Capital Structure of Bamburi Cement Company; Bamburi’s debt-asset ratio of 22.9% and capitalization ratio of 24.2% shows that it is less dependent on leverage, i.e., money borrowed from and/or owed to others. As seen elsewhere in this paper Bamburi Cement operates in a highly dynamic environment and their choice of capital structure measure resonates well with what modern thinking is, about, finding the right or best financing mix. Firms in industries characterized as exhibiting high levels of dynamism are more successful if they had relatively low levels of debt. One of the dramatic changes created by the expanding global economy is the increase in the rate of change within industries. And as more industries experience greater levels of change, the use of debt-centered governance will prove less effective in the near future. The other areas covered include; determinant factors of Capital Structure, Limitations in improving Capital Structure and How to improve Capital Structure.
Bamburi Cement Ltd. was founded in 1951 by Felix Mandl – a director of Cementia Holding A.G. Zurich. Cementia later went into partnership with Blue Circle PLC (UK). In 1989, Lafarge, the world’s largest building materials group, acquired Cementia, and thus became an equal shareholder with Blue Circle. Lafarge bought Blue Circle in 2001 to become the largest building materials company in the world and Bamburi Cement Limited principle shareholder. It’s first plant Mombasa started production in 1954 with annual capacity of 140,000 tonnes of cement. Today the Mombasa based plant has the capacity to produce of 1.1 million tonnes.
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