Displaying items by tag: Kenya
Kenya: East Africa Portland Cement Company (EAPCC) is set to construct a US$9.13m power plant that is expected to reduce its annual power bill by about US$5.70m. The 4MW power plant will run on waste gases generated by the company's Athi River cement plant via waste heat recovery (WHR) system. Construction is scheduled to start in September 2014 and is expected to take one year.
"The new power plant will have a huge impact on our operational costs because its output will translate to about 40% of our current total energy requirements," said EAPCC's managing director Kephar Tande.
Around 20 - 25% of the project costs will be funded from internal savings with the rest of the funds coming from commercial loans. EAPCC also hopes to permanently address the problem of frequent power outages, which have posed major problems at its clinker plant. EAPCC currently consumes about 13MW of power supplied from the national grid to run its main installations, including a 1700t/day capacity kiln.
Tande said that the new power plant would help to stabilise the company's operations as it eyes expansion of its overall cement production capacity to 2Mt/yr by 2017 from the present 1.3Mt/yr. EAPCC plans to begin procurement for a new clinker plant near Bisil, Kajiado Country, Kenya in September 2014 at an estimated cost of US$171m. "We hope to conclude the feasibility study on the new clinker plant in Bisil by end of July 2014 and move to the next stage," said Tande.
Also on the cards is the construction of a second cement plant in the Nooleleshuani area of Kajiado County by 2016. The proposed plant site is next to the limestone-rich Maasai Plains, which are the major source of raw material for the five cement companies based in Athi River.
Kenya's power shortage has held back industrial expansion for decades despite the availability of huge energy reserves such as wind, coal and geothermal. The energy sector, though critical in uplifting the country's development, has registered slow growth due to the high initial capital requirements and inability to mobilise adequate financial resources to undertake large-scale investment.
EAPCC staff suspended after cement theft probe
09 June 2014Kenya: Three employees of East Africa Portland Cement Co (EAPCC) have been suspended while three more have been put under further investigations in the ongoing forensic audit into the theft of cement. The six are said to be mid-level managers in the company's procurement and supplies department.
Another two employees have been cautioned following the audit of EAPCC sales and procurement books. "A number of staff who were found culpable were disciplined according to the gravity of their offences," said EAPCC. "Three people were interdicted, three were asked to explain their actions and why disciplinary action should not be taken against them and another two were cautioned."
The investigations into suspected theft by staff at EAPCC revealed massive manipulations of sales records leading to the fraudulent shipment of large consignments of cement from the factory premises in Athi River. Sources at EAPCC said that the audit revealed rampant manipulation of product quotations and Local Purchases Order (LPO) prices, rendering the company's products more expensive in the market hence depressing sales. This has had a direct impact on the business and raised the cost of production.
"We are not relenting on this one," said an EAPCC spokesperson. "A lot of dirty things have been going on here and we have resolved to kill the illegal deals once and for all."
EAPCC expects its profits to dip by more than 25% over the financial year that ends in June 2014. The company attributed the expected dip in profit to reduced sales and rising costs. EAPCC also attributed the outlook to reduced export sales and loss of market share in Kenya.
EAPCC expects sharp drop in full-year profit
21 May 2014Kenya: East Africa Portland Cement Company (EAPCC) expects its profit for the financial year that ends in June 2014 to drop by at least 25% compared to the preceding year's performance, in which it made US$19.3m in profit. The company has issued a profit warning, attributing the expected dip in profit to reduced sales and rising costs.
"It is projected that the profit for the 2013 - 2014 financial year will fall by more than 25% compared with the 2012 - 2013 year," the company said. EAPCC also attributed the outlook to reduced export sales and loss of market share in Kenya.
While EAPCC's sales have declined significantly, it has maintained fixed costs, including salaries, at a high level to maintain operations. This implies reduced margins, with the firm having already posted a weaker performance in the first six months of its 2013 – 2014 financial year, which ended in December 2013. Its net profit during the period fell by 43.9% to US$2.09m, weighed by higher costs and flat sales of US$51.2m.
Analysts at the Standard Investment Bank (SIB) said EAPCC has been hit by inefficiencies and perennial business disruptions brought by shareholder disputes. The government, which has a 52.3% stake in EAPCC and Lafarge, which owns a 41.4% stake, have in recent months fought to control the cement firm. The latest battle has seen the government report Lafarge to the Competition Authority for its cross ownership in EAPCC and its rival, Bamburi Cement.
Kenya: Kenya's antitrust authority may force Lafarge to sell some of its interests in the country if the cement maker is found to be flouting domestic competition rules.
The Competition Authority of Kenya (CAK) is probing Lafarge's influence on Kenya's cement industry through its 59% stake in Bamburi Cement and 42% shareholding in East Africa Portland Cement Co (EAPCC). The findings will be published in June 2014, according to the CAK's director general Francis Kariuki.
"The current arrangement between Lafarge and EAPCC may be deemed to be an unwarranted concentration of economic power because of the close directorship Lafarge has in EAPCC and Bamburi," said Kariuki. The CAK is investigating pricing in the Kenyan cement industry amid a dispute between shareholders and the government over ownership of EAPCC. Kenya's Treasury holds a 25% stake in the company, while the state-owned National Social Security Fund has 27%.
The government wants Lafarge to dilute its shareholding in EAPCC because no company should hold a 'monopolistic stake' in Kenyan industries, according to Industrialisation and Enterprise Development permanent secretary Wilson Songa. Cross-shareholdings are 'widely recognised to dampen competition,' according to the CAK. Bamburi Cement, in which Lafarge has a controlling stake, owns 12.5% of EAPCC. "Even passive shareholdings change the incentives to set prices, as some of the earnings from sales diverted to a rival are now internalised," said the CAK.
If Lafarge is found to have a monopolistic position in Kenya, the CAK may force Lafarge to sell its stake in one of its businesses in the country, according to Kariuki. Kenyan law also stipulates that anyone found guilty of price fixing faces a US$115,000 fine or a five-year jail term.
Railroad to African riches
14 May 2014The prospects for the East African cement industry have risen this week following the formal agreement to build a new railway line linking the port city of Mombasa and Nairobi in Kenya. The US$3.8bn project will replace the existing 100 year old narrow gauge track with work scheduled to start in October 2014 and a completion date in 2018. The second phase of the project is then intended to extend the line to neighbouring inland countries including Uganda, South Sudan and Rwanda among others.
The bottom line here from Reuters' reporting is that the new line will cut freight costs by more than half to US$0.08/t per km from US$0.20/t per km. Anybody considering sending freight along the 610km line could see their costs drop from US$122/t to US$49/t. With the average cement price in Kenya reported at US$75/t at the start of 2014, these kind of prices seem unlikely to throw the market to the mercy of overseas imports. Moving one tonne of cement along the full length of the line would cost more than half of the selling price. Yet the effect on input costs or transport over smaller distances may have an effect, especially if the inland extension actually gets built.
Kenya has four integrated cement plants with a production capacity of 3.4Mt/yr. Of these three - ARM Cement, Bamburi Cement (Lafarge) and Mombasa Cements are on the coast – and only one plant, the East African Portland Cement Company, is based inland in Nairobi. In addition National Cement and Savannah Cement both run clinker grinding plants near Nairobi.
A number of plants are being built. Most recently, Savannah Cement announced plans in April 2014 to build a clinker production plant. The East Africa Portland Cement Company plans to build a plant in Kajiado for operation by 2016. Nigeria's Dangote Cement has a 1.5Mt/yr cement plant planned to start operation in 2016 in Kitui, between Nairobi and the coast with ARM seeking funding to build a 2.5Mt/yr cement plant in the same region. Cemtech, a company owned by India's Sanghi Group, has plans to build a plant in West Pokot County in western Kenya but the project has been delayed due to issues with land acquisition.
Despite all this development activity Kenyan Bureau of Statistics figures suggest that more cement is being produced in the country than is officially being consumed. In 2013, 4.8Mt of cement was produced but only 3.94Mt was consumed. Yet both production and consumption have more than doubled since 2004 from 1.87Mt and 1.27Mt respectively. With the Kenyan construction sector averaging a growth rate of 6.45%/yr between 2004 and 2012, it looks likely that consumption will continue to rise and all these new cement plants are poised to benefit form this.
The old Ugandan railway, which the new railway seeks to replace, started construction in 1896 and was backed by the British government. It was nicknamed the 'Lunatic Line' given the harsh terrain and the high worker fatalities. The perils facing the project were capped by a pair of man-eating lions who attacked workers as depicted in the book 'The Man-Eaters of Tsavo' and eventually made into a film called 'The Ghost and the Darkness' starring Michael Douglass. Then as today the potential benefits of connecting the African coast to the interior were seen as high.
Kenya: Karsan Ramji & Sons Ltd, a Kitengela-based quarry operator, has announced that it will begin construction of a 700t/day cement grinding plant by the end of 2014.
Karsan Ramji & Sons has revealed plans to build a US$4.91m mini cement plant in Athi River, adding competition pressures in an industry whose prices have remained flat for about a decade. It will be compete with established players such as Bamburi, East African Portland Cement Company (EAPCC) and ARM Cement, which together control 77% of Kenya's cement market.
"We are waiting for all of the approvals before we can kick off," said Kishon Varsani, managing director of Karsan Ramji & Sons. The cement plant will import clinker and source pozzolana and gypsum from its quarries in Kajiado and Kilifi.
Africa: Chief Executive Officer at Dangote Cement, Devakumar Edwin said that the company plans to start operations in Sierra Leone, Cameroon and Zambia in 2014. Dangote, which has a production capacity of 20.3Mt/yr in Nigeria, also intends to add 9Mt/yr to production in Nigeria by the end of 2014.
Edwin said that Dangote is currently reviewing its operations in Kenya in light of the discovery of limestone deposits in the country. Dangote plans to increase the capacity of its proposed plant in Kenya from 1.5Mt/yr to 3.0Mt/yr.
"In Ethiopia, work is well underway to build 2.5Mt/yr plant at Mugher, with commissioning expected late in 2014. In Tanzania, we have begun work on a 3Mt/yr plant at Mtwara that will be operational in 2015. In Zambia, work is underway on a 1.5Mt/yr plant at Ndola with cement production expected in the second half of 2014," said Edwin.
The bid to expand is part of the company's long-term expansion strategy across the continent. Dangote has three plants in Nigeria and plans to expand into 13 other African nations, bringing its total capacity to more than 60Mt/yr by 2016. Edwin added that the company is stalling its business plan in South Sudan 'because of military conflict in that nation.'
Dangote recorded a turnover of US$2.3bn in the 2013 financial year, up by 29.4% from US$1.8bn in 2012. Profit before tax was US$1.18bn, compared with US$836m in 2012, while profit after tax rose to US$1.24bn, a 38.73% increase when compared to US$899m recorded in the same period of 2012.
Lafarge faces price-fixing penalties
25 April 2014Kenya: Lafarge could face penalties by the Competition Authority of Kenya (CAK) for suspected price-fixing. CAK has accused Lafarge of possible price-fixing owing to its cross-directorship in East African Portland Cement Company (EAPCC) and Bamburi Cement. Lafarge has a 41.7% stake in EAPCC and a 58.9% stake in Bamburi.
"Cross-shareholdings such as these are widely recognised to dampen competition," said CAK. "Even passive shareholdings change the incentives to set prices, as some of the earnings from sales diverted to a rival are now internalised."
CAK is expected to rule in June 2014 as to whether or not Lafarge is culpable of having 'Unwarranted concentration of economic power.' If found guilty, CAK could force Lafarge to sell off its stake in one of the businesses. The Competition Act (No 12 of 2010) also stipulates that Lafarge directors, if found guilty of price fixing, could be forced to pay up to US$115,000 in fines or serve five-year jail terms.
The report comes four months after the Kenyan government, which together with the National Social Security Fund (NSSF) has a controlling stake of 52.3% in EAPCC, accused Lafarge of attempting to destabilise the cement maker to protect its interests in Bamburi. Lafarge countered that its minority stake in EAPCC is insufficient to exert control over the firm. They added that EAPCC is a genuine competitor of Bamburi Cement and that Lafarge stands to lose if it were to destabilise EAPCC.
The director-general of CAK, Kariuki Wang'ombe, stated that the current shareholding structure is not good for fair business. "Cross-directorship could lead to price-fixing since this creates a position where a competitor is privy to the strategic decisions of another competitor. However, it is not conclusive that there is price-fixing going on," said Wang'ombe.
Savannah Cement to invest US$200m in clinker production
22 April 2014Kenya: Savannah Cement plans to invest US$200m to develop a clinker plant. Currently, most of the major cement companies in Kenya rely on imported clinker.
Savannah Cement board chairman Benson Ndeta announced that the company, which currently has a production capacity of more than 1.5Mt/yr of cement, will develop the clinker plant to boost its market share. Ndeta said that the firm hopes to be a major competitor in the regional market in the supply of cement to Rwanda, Burundi, Tanzania, Uganda, the Democratic Republic of Congo and South Sudan after satisfying its local market with cement.
Tande to remain at EAPCC's helm for the next three years
22 April 2014Kenya: Industrialisation and Enterprise Development cabinet secretary Adan Mohamed has confirmed the extension of Kephar Tande's term for a further three years as the managing director of East African Portland Cement Company (EAPCC). The appointment is effective from 16 November 2013.
His confirmation has been pending since 2013 after the company's board requested that the government renew his term, which ended in October 2013, after being in the position since November 2011.
"I wish to thank the cabinet secretary and president, Uhuru Kenyatta, for the re-appointment. I am committed to fully implementing the strategy that the company has embarked on to raise its market share and to ensure that EAPCC is a leading cement manufacturer, for the welfare of our staff and the benefit of all of our stakeholders," Tande said.