Displaying items by tag: Dangote Cement

The outgoing chief executive of PPC (Portland Pretoria Cement) officer, Paul Stuiver, summed up the dilemma facing cement producers on the east coast of Africa. Building near the coast leaves you vulnerable to imports.

In a recent interview with the South African business weekly, 'Financial Mail', Stuiver said that imports are not a threat to African expansion, provided that a facility is not built within 200km of a port. Exactly the same issue was raised by Yves De Moor in his column in the November 2012 issue of Global Cement Magazine.

Countries along Africa's east coast receive imports, but Stuiver said that Africa's high logistics costs mean the prices increase steeply as the cement is transported inland. He commented that the markets in Mozambique and KwaZulu Natal in South Africa were especially vulnerable and that most imports to South Africa come through Durban. Unsurprisingly both of PPC's big recent investments have been in landlocked countries, Zimbabwe and Ethiopia respectively. In July 2012 it also tried to invest in CINAT, the Democratic Republic of Congo's state-owned cement producer.

The import issue to South Africa reignited last week when the South African National Regulator for Compulsory Specifications (NRCS) confirmed that it had confiscated 'sub-standard' cement imported from Vietnam. As we covered in August 2012 in this column this follows a row in July 2012 about whether cement from Pakistan's Lucky Cement was complying with South African standards.

Although standards still lead the argument, more honesty has emerged with the use of the word 'dumping' in the complaints. Stuiver explained that "...the price of cement from Pakistan, India and Vietnam is low because electricity, fuel and transport rates are subsidised." Whilst PPC can report that its revenue has risen by 9% to US$837m for the first nine months of 2012, complaints against foreign imports seem overly protective. In 2009 PPC confirmed the existence of a cartel in the country. PPC has even gone to the Advertising Standards Authority to stop imports with elephants on their bags!

With reports that Nigerian producer Dangote is building a new US$389m plant in South Africa, thoughts turn to what will happen once South Africa becomes 'self-sufficient' in cement, like Nigeria which has proudly announced this recently. Giant infrastructure projects are one way to use all that excess cement and this is what Lafarge WAPCO has been asking the Nigerian government to do recently, in a road building drive. Better transport links in South Africa would wreck Stuiver's maxim about not building near a port.

Two solutions from this week's news might appeal to the industry on the south and east coasts of Africa. The first is to use inventive export barriers just like the Bureau of Indian Standards have imposed to slow down exports from Pakistan. The second is to persuade importers to do what a North Korean ship reportedly did with its consignment of cement this week off the coast of Somalia: dump it in the sea.

Nigeria: Dangote Cement has reported a pre-tax profit of US$674m for the nine months ending 30 September 2012, a rise of 13.5% compared to the same period in 2011. The company's sales revenue increased to US$1.33bn, a rise of 19.8%. The cessation of lower-margin imports and their replacement with locally-produced cement has helped to reduce the cost of sales, but the potential gains in margin were largely offset by increased use of furnace oil at higher-than expected levels during 2012.

In its unaudited results for the first nine months of 2012 Dangote reported that cement sales were 7.7Mt, with all cement sold produced locally. In spite of these achievements, the company said the third quarter sales were seriously affected by heavy rainfall and flooding but that margins were rising as gas supplies return to normal. Serious flooding affected Kogi and Benue states in the third quarter of 2012 where two Dangote plants are located.

"In spite of these problems we have increased sales by nearly 20% in the first nine months of 2012, with sales of locally produced cement rising by nearly 51%. Even in the difficult third quarter we increased shipments by nearly 8% during a period in which we estimate the industry increased volumes by less than 4%, so it is clear we are increasing our market share," said chief executive of Dangote Cement, Devakumar Edwin.

Dangote Cement is Nigeria's leading cement producer with three plants in Nigeria and plans to expand in 13 other African countries. The group is a fully integrated quarry-to-depot producer with an expected production capacity of 19Mt/yr in Nigeria by the end of 2012, increasing to as much as 35.25Mt/yr by 2015. The group plans to build a further 19Mt/yr of production and import capacity across Africa by 2015.

South Africa: Sephaku Cement, a subsidiary of Nigeria's Dangote Cement, has secured US$223m of domestic debt funding for a US$389m cement plant and grinding facility project in Mpumalanga and North West provinces.

Two of the country's big four banks, Standard Bank and Nedbank, advised by Sasfin Capital, have jointly funded the 10-year deal. Sephaku said this was a 'strong' vote of confidence in South Africa's market and that the agreement would enable it to become a significant competitor in the wholesale and retail cement trade in the region.

Sephaku Cement, established in 2006, is an associate of JSE-listed Sephaku Holdings, a 64%-owned subsidiary of Nigerian-based Dangote Cement. Dangote had invested more than US$126m in the venture, the largest ever foreign direct investment in South Africa by an African company. The new project includes a production facility, which would produce about 1.2Mt/yr, at Aganang near Lichtenburg in North West.

"We believe that Nigeria has arrived as a cement manufacturing country," said Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria (CMAN), to mark yet another 'moment' when Nigeria's ability to produce cement has overtaken its demand.

One of Makoju's reasons for Nigeria's 'arrival' was the fact that the Nigerian government hasn't issued any import licenses since the start of 2012.

As Global Cement Weekly #46 noted in April 2012 this is strange given that domestic consumption is up to 18Mt/yr: a figure 4Mt below modest estimates of national capacity which start at 22Mt/yr. According to Global Cement monthly price reviews the cost per bag has risen by 20% since 2010 despite presidential orders to keep it down. However much cement Nigeria seems to produce the price still keeps on rising.

The prices aren't the only figures that are rising year-on-year. Dangote, Nigeria's leading-producer, reported an increase in operating profit of 14% to US$745m in 2011 from US$654m in 2010. Lafarge WAPCO, the country's second largest producer, reported an increased operating profit of 41.7% to US$74.1m from US$52.3m.

Prices continue to rise but this could be due to cartel-like behaviour. President Goodluck Jonathan seemed to suggest as much in 2011 when he ordered prices down. Then again Nigeria's poor transport infrastructure and distribution chains could be to blame for rising prices instead. CMAN has announced plans to promote the use of concrete road construction with the government and Dangote announced plans in August 2012 to widen its distribution by opening more 'mega-depots' and signing on new distributors.

It's unclear exactly how much cement the Nigerian market actually wants. Its per capita consumption is 110kg, compared to 280kg in South Africa and over 600kg in Egypt. This is way down the consumption/GDP curve compared to Europe and North America. Its population has reportedly risen by 30m from 2006 to 2012. This implies massive total demand and demand potential.

So - past massive transport infrastructure projects, improved distribution and possible price inflation - how does Nigeria keep momentum? Ironically, given Nigeria's protectionist stance against imports, one of the measures CMAN is exploring is how to export cement to other countries. Recent news reports about local producers in Namibia and South Africa fighting foreign imports suggest that other African countries are starting to 'arrive' too. Even building the roads may not be enough to keep Nigeria's cement express-train on track.

Nigeria: Dangote Cement has said that it is widening the distribution of its cement in Nigeria by opening more depots and signing on new distributors. It says it is doing this so that domestic consumers can reap the full benefit of the increased local production.

A statement from the company said that there have been growing concerns over the price of cement even with continuous efforts at increasing production. Dangote, which accounts for over 70% per cent of domestic production, has continued to invest in local production by expanding its production lines and establishing new plants. The statement added that the Dangote management believe that only a 'liberalised distribution system' can convert increased local production to cheaper cement.

Domestic production capacity in Nigeria is believed to have reached about 27Mt/yr , whilst demand hovers at between 17Mt/yr and 18Mt/yr.

Nigeria: The government of Lagos State has unveiled a new deal with Dangote Cement and Lafarge Cement WAPCO. The collaboration will help to ensure undisrupted supplies of cement products to construction firms that have been contracted to handle various infrastructure projects that are to be carried out by the state in the coming years. 

Commissioner for Works and Infrastructure, Dr Obafemi Hamzat, revealed the details and explained that Governor Babatunde Fashola had engaged both Dangote and Lafarge Cement WAPCO to guarantee stable supplies. "We are looking into the use of concrete now that we have a lot of cement in the country. We have met with Dangote and Lafarge to see how they can assist us with our contractors."

Hamzat lamented the high cost of cement imports as one of the reasons responsible for the high cost of road construction and urged the Federal Government to restore railways so that they can be used as an alternative route.

Nigeria: Nigerian billionaire Aliko Dangote has announced that his cement company is aiming for a valuation of up to US$40bn on the London Stock Exchange (LSE) when it is floated in 2013. If realised, the company would be valued at several times the size of France's Lafarge.

Dangote's cement empire stretches from Senegal to South Africa, benefiting from a construction boom across one of the world's fastest growing continents. In a difficult global environment for share offerings, Dangote said he was not discouraged by the tumble in Facebook's shares since they listed in May 2012.

"Whereas the assets of Facebook were hype, we have real assets," said Dangote, setting out the market capitalisation he expected for his firm at the listing planned for late 2013. "It depends on the market, but it should be something like
US$35-40bn," said Dangote.

Despite Dangote's desire to present the company as larger than Lafarge, its revenue was in the order of 13 times lower than its French rival in 2011. Dangote highlighted, however, that the company's rapid expansion would make it considerably larger than it is now by the time of the listing, with new plants due to be completed in 13 other African countries by then. Alongside its expansion, he noted that Lafarge is in the midst of a cost-cutting programme in an effort to offset the impact of stagnation in its main markets and to cut its debt.

Cameroon: Construction of a US$115m cement plant by the Nigerian cement giant Dangote has restarted in Douala after resolution of a land dispute. Work on the 1.5Mt/yr facility began in September 2011 but was halted in early 2012 after the Sawa people filed an injunction against the project, complaining it violated their sacred site on the banks of the Wouri River.

"Following instructions from the Presidency of the Republic, work has resumed at the Dangote cement factory," said Joseph Beti Assomo, the governor of the region under which Douala falls. "Let me seize this opportunity to inform you that the mix-ups surrounding the site of the Dangote project have been entirely dissipated to enable resumption of work."

Nigeria: The cement sub-sector of the Nigerian economy received a further boost on 11 June 2012 when President Goodluck Jonathan inaugurated the new 5.25Mt/yr Dangote Cement Obajana Plant Line 3. The plant launch is part of the nation's drive to 'free itself' from foreign cement imports.

With the commissioning of the new line, the production capacity of the Obajana Plant will be raised to 10.25Mt/yr. In 2015 a fourth line will be completed, giving a combined production capacity of 13.25Mt/yr. This would make it the largest cement plant in the global cement industry.

The line 3 launch follows the commissioning of Dangote's 6Mt/yr Ibese plant. The company aims to lead the way in the Nigerian cement market and have sufficient material left over for export.

With the continuous expansion of the existing plants in the country and its operations across 14 other African countries, Dangote Cement will remain one of the largest producers in Africa and the world. The company said that the inauguration marked a milestone not only for the company but also for Nigeria, pointing out that the Obajana project will make Dangote Cement the 'power house of cement in Africa.'

Group President Alhaji Aliko Dangote has previously said that Dangote Cement would soon start to convert its import terminals for export terminals in readiness for exportation of its excess capacity to neighbouring countries.

Nigeria: Dangote Cement's new 6Mt/yr Calabar plant, in the Cross-River State, will be ready by the end of July 2012. Chairman Aliko Dangote made the announcement at the company's annual general meeting in Lagos.

According to Dangote the Calabar plant is almost completed, with a strategic location intended to supply both local consumers and those in Central African states like Cameroon and Gabon. Together with the planned expansion of the Ibese plant by 3Mt/yr, the June 2011 commissioning of the Obajana Plant and other operations in 14 other African countries, Dangote Cement aims to reach a capacity of 60Mt/yr by 2015. Of this total, 55% is intended to local consumption and 45% is intended for export to other sub-Saharan African countries.