Displaying items by tag: Bamburi

Kenya: Cement companies are in the process of expanding their total clinker production capacity by 70% to 10.7Mt/yr by 2023 from 6.3Mt/yr. The Business Daily newspaper has reported that six producers – Bamburi Cement, East African Portland Cement Company (EAPCC), Karsan Ramji & Sons, National Cement, Rai Cement and Savannah Cement – will add a total of 4.4Mt/yr to their clinker capacities.

Global Cement News previously reported that Kenya faced a 3.3Mt/yr national clinker shortage on 13 October 2021. Domestic producers are in the process of lobbying the government to raise the duty on imports of clinker to 25% from 10%.

Kenya: Bamburi Cement has appointed John Stull as a non-executive director following the resignation of Pierre Deleplanque. The latter was appointed to the company’s board in mid-2018 and is its Area Manager - East, South Africa & Indian Ocean.

Stull, an American national, is the Head of Strategy and Mergers & Acquisitions for LafargeHolcim Middle East & Africa region, and has over 28 years’ experience in the LafargeHolcim Group having joined it in 1992 as Operations Manager, Alpena Michigan - USA. In 1996 he was promoted to Vice President, Manufacturing - USA Region, and thereafter held several leadership positions including: President, Missouri Division, Ready Mix and Aggregates; Senior Vice President, Marketing and Supply Chain - Lafarge France; Regional President, Sub-Saharan Africa; President and Chief Executive Officer (CEO) LafargeHolcim USA; CEO US CEM; and prior to his latest role as President & CEO -LafargeHolcim Philippines. He holds a Bachelor of Science Degree in Chemical Engineering from the University of Akron and an Advanced Management Degree from Harvard University.

Kenya: Bamburi Cement, Savannah Cement, Ndovu Cement and Rai Cement have written to the National Treasury opposing a proposal by the Kenya Association of Manufacturers (KAM) to raise tariffs on clinker imports to 25% from 10% at present or to implement at outright ban on imports. The cement producers say that increasing the tariffs would lead to unfair competition and destroy investments, according to the Kenyan Star newspaper. However, the KAA argues that the move will promote the manufacturing sector and create jobs.

Seddiq Hassani, the managing director of Bamburi Cement, said in a letter from the cement producers to the government, that they opposed the review at the current time but that they conceded that it was the right direction for the industry in the longer term to safeguard local manufacturing. He added that the four companies should be given a window of between four and five years to set up their own integrated plants to provide a predictable policy framework for investors.

Kenya: Bamburi Cement has decided against the planned sale of its Mombasa precast concrete blocks plant. The Standard newspaper has reported that the company previously failed to sell the asset to Yellow House Limited, because the buyer failed to meet conditions precedent to the agreement. The Competition Authority of Kenya (CAK) had approved the sale in March 2020.

Kenya: LafargeHolcim subsidiary Bamburi Cement has made a donation of personal protective equipment (PPE) worth US$46,800 to coronavirus rapid response teams and 11 health facilities in Kajiado, Kilifi, Kwale, Machakos and Mombasa Counties. The company said that the donations include “N95 masks, surgical gloves, coveralls, goggles, face shields and shoe covers.” This will constitute part of the US$140,000 donations promised by the company to “support the fight against the spread of Covid-19.”

Group managing director Seddiq Hassani said, "During the cheque handover to the Covid-19 Emergency Response Fund Board earlier this year, we committed to continued support to Covid-19 management efforts and therefore, with the escalating numbers of Covid-19 cases, today we fulfil our promise with this donation to our frontline healthcare workers who continue to serve with fortitude by ensuring that they remain safe while serving Kenyans. We value their priceless role in battling Coronavirus.” He added, “We care for the community and we are determined to be part of the solution to this pandemic and make a difference for the benefit of us all.”

Kenya: Bamburi Cement’s profit before tax grew by 17% year-on-year to US$6.9m in 2019 from US$5.8m in 2018. It attributed the result to cost cutting and an optimisation initiative under its ‘Building for Growth’ plan. It said that this was achieved in spite of a decline in the Kenyan cement market and lower selling prices.

“Despite market challenges, including the absence of sales to Rwanda through Hima Cement, the shelving of major infrastructural projects such as Phase 2B of the Standard Gauge Railway (SGR) project in Kenya, contraction of the Kenyan market and price erosion fuelled by aggressive competitive pressure, both Bamburi Cement and Hima Cement grew share while sustaining respective market leadership,” said Bamburi Cement’s Group Managing Director Seddiq Hassani. He added that Bamburi Cement and Hima Cement remained resilient despite ‘challenging’ economic conditions.

The subsidiary of LafargeHolcim reported an increase in finance costs due to debt related to a capacity expansion project commissioned by Hima Cement in 2018. An impairment of assets in Rwanda was caused by its Hima Cement subsidiary in Uganda being unable to ‘access’ the market in Rwanda. The closure of the border between Uganda and Rwanda in February 2019 also further negatively impacted growth.

In Kenya, overall sales were negatively affected by the shift of volumes previously exported to Uganda from Bamburi Cement, following the commissioning of Hima Cement capacity expansion project in 2018, further reducing despatches from Bamburi Cement. In Uganda, although overall sales were negatively impacted by the inability to access the Rwanda market, Hima Cement domestic volumes grew.

Pradeep Paunrana’s latest attempt to wrest back control of ARM Cement was dismissed this week in Kenya. Administrators PricewaterhouseCoopers rejected a US$12.5m guarantee to stop the sale to a rival, according to Business Daily newspaper. Paunrana, the former managing director and majority shareholder of ARM Cement, had teamed up with Rai Group to thwart a rival bid for his company from National Cement.

The guarantee was a 20% portion of a full bid of US$63m by Paunrana and Rai Group but the administrators rejected it on the grounds that it had a nine-month time limit. They were reportedly concerned that legal proceedings over ownership of the cement producer could last beyond this. A deal to sell ARM Cement to National Cement for US$50m was agreed in May 2019. However, Paunrana fought back and the courts are expected to deliberate over the issue for some time.

ARM Cement entered administration in August 2018 following a growing loss in 2017 and poor markets in Kenya and Tanzania. At the time the cement producer blamed its poor performance on elections in Kenya causing reduced cement demand, a coal import ban in Tanzania causing production issues at its Tanga cement plant and increased competition in both countries.

The implications of National Cement actually succeeding in its bid for ARM Cement would mean a realignment of the local industry. LafargeHolcim’s subsidiary Bamburi Cement leads the sector by production capacity and market share. It operates one integrated and one grinding plant. Mombassa Cement and then a variety of smaller companies, trail it.

The Devki Group-backed National Cement has steadily been expanding in recent years. In April 2018 it was announced that the International Finance Corporation (IFC) was going to invest US$96m in National Cement and that Devki Group chairman Narendra Raval was going to commit a similar sum towards a new integrated line in Kenya and two new grinding plants in Kenya and Tanzania. More recently it acquired the long-running Cemtech plant project in West Pokot, along with its mineral deposits and licences. If it were able to successfully buy ARM Cement it would become Kenya’s second largest cement producer by market share.

ARM Cement is not the only Kenyan cement producer facing these kinds of problems. The Kenyan government is the majority shareholder East Africa Portland Cement Company (EAPCC) and it has been working on a rescue package for it since early 2019. The local market had similarly negatively affected the EAPCC’s financial performance and it has been attempting to cut its debts. In its case, it has been trying to sell land to pay off its debts but it has faced disputes with local residents. It has also tried reducing its workforce, with varying degrees of success. Its integrated plant at Athi River near Nairobi was reported to be operating at a 50% capacity utilisation rate in late 2018.

Table 1: Cement production in Kenya, 2015 – 2019. Source: Kenya National Bureau of Statistics (KNBS).

Overall cement production in Kenya peaked at 6.7Mt in 2016 and has fallen since. It fell by 2.8% year-on-year to 2.9Mt in the first half of 2019 from 3Mt in the same period in 2018. Consumption fell by a similar amount to production in the first quarter of 2019. Analysts like Knight Frank have blamed this on a slowdown in the real estate market, although it holds up hope for government house building scheme to rescue the situation.

In this kind of market it is understandable that the cement market is rationalising. The World Bank has forecast gross domestic product (GDP) growth of 5.8% in 2019 and better in the years ahead. Whoever is left in the cement business once the corporate dust settles stands to benefit.

Kenya: Bamburi Cement has paid a US$3m settlement to the Kenya Revenue Authority in a long-running dispute. The figure is significantly less than the US$38.5m the tax authority originally demanded in 2012, according to the Business Daily newspaper. However, the cement producer still owes US$2.8m in penalties, although it has applied to have this waived.

Kenya: Bamburi Cement’s profit before tax fell to US$6.73m in 2018 from US$40.7m in 2017. Its turnover rose by 4% to US$369m from US$356m. Its cement volumes grew by 5%. It blamed the drop in profits on increasing energy and raw material costs. The subsidiary of LafargeHolcim noted that the market delinked by 5% in Kenya, its primary market, and was ‘flat’ in Uganda. It also noted ‘increased competitive pressure’ due to cement grinding production capacity and the ‘shrinking’ market.

Congratulations are due to Bamburi Cement this week after the completion of a new production line at its Nairobi grinding plant. The new US$40m line will add 0.9Mt/yr of cement production capacity to the unit, bringing its total to 2.4Mt/yr when it is commissioned towards the end of 2018. Together with the subsidiary of LafargeHolcim’s integrated plant at Mombasa the company will have a production capacity of 3.2Mt/yr.

Graph 1: Cement production and consumption in Kenya 1999 - 2017. Source: Kenya National Bureau of Statistics.

As Graph 1 shows above it is an interesting time to open new production capacity in the country. Both production and consumption fell for the first time since 2000 in 2017. Production fell by 8.2% year-on-year to 6.2Mt in 2017 from 6.7Mt in 2016 and consumption fell by a similar amount. The change was blamed on reduced demand for building materials in the construction sector occurring at the same time as a fall in the value of building plans approved in 2017. The country also suffered political uncertainty as its general election in August 2017 was subsequently annulled and repeated in October 2017.

With Global Cement Directory 2018 data giving Kenya a cement production capacity of 5.2Mt/yr from five producers and at least four grinding plants with a capacity of 4.6Mt/yr it looks like the country is in an overcapacity phase. The question for producers like Bamburi Cement is whether 2017 is just a temporary blip or not. After all, as per usual for many African countries, the demographic pressure for development to happen and per capita cement consumption to grow seems ineveitable.

Bamburi Cement is not alone in betting on growth. Also this week the Kenya Port Authority recevied four hoppers from the UK’s Samson for the Port of Mombasa. The hoppers will be used to import clinker, coal and gypsum at the site. Earlier in February 2018, National Cement opened a 1.2Mt/yr integrated plant in Kajiado County. On the larger scale Nigeria’s Dangote Cement has been preparing to open two cement plants, near Nairobi and Mombasa respetively. However, these project were reported delayed to 2021 in its annual report for 2016 around the time the company faced problems at home due to a local financial recession.

Meanwhile local producers have faced pressure so far in 2018. Bamburi Cement reported a 6% fall in turnover to US$357m in 2017 that it blamed on the weather, the elections and lower construction activity. Other producers have had a harder time of it with the East African Portland Cement (EAPC) reportedly having to rely on a land sale to remain solvent in April 2018. ARM Cement has also been forced to sell assets to remain operational. Its loss for 2017 more than doubled to US$55m. Amid the problems the UK-government investor CDC Group, which holds a 41% stake in the company, replaced board members of the company in a likely bid to shore up the situation.

It’s into this kind of situation that Bamburi Cement has opened its new plant. On the plus side though it is a grinding plant so it should be able to maximise the company’s use of clinker from either within the country or from imports from other LafargeHolcim operations elsewhere. In its press release for the new unit the company pinned its hopes on anticipated growth in domestic housing and infrastructure projects, backed by government schemes for affordable housing and roads. With the rating agency Moody’s having issued a report this week about the relative reslilence of the Kenyan economy despite recent shocks such as last year’s elections, Bamburi Cement may yet have the last laugh.