
Displaying items by tag: Kenya
Cement signals – import row in Kenya
08 July 2015Kenyan cement producers kicked off this week about Chinese cement imports for the Standard Gauge Railway Project in Kenya. Local producers, including ARM Cement and Lafarge, have asked the Kenya Railways Corporation to explain why the Chinese-backed project is importing cement. Project builders the China Rail & Bridge Corporation (CRBC) has imported 7000t of cement so far in 2015 according to Kenya Ports Authority data.
Project completion is planned for 2017 with a requirement of 1Mt of cement. If CRBC carried on this rate then, roughly, the project might only use 42,000t of imported cement if the import rate holds. This is less than 5% of the estimated requirement. However, cement imports increases into Kenya have stayed steady since 2012. Imports rose by 2000t from 2013 to 2014. CRBC's imports will stick out significantly in 2015.
Kenya National Bureau of Statistics (KNBS) data places Kenyan cement production at 5.8Mt in 2014, an increase of 16.3% from 5.1Mt in 2013. Production growth has been steadily building since the late 1990s with, more recently, a dip in the rate of growth in 2011 that has been 'corrected' as the growth has returned. Consumption has risen by 21.8% year-on-year to 5.2Mt in 2014 with imports also rising and exports dropping.
Imports for the railway project are duty free as ARM Cement Chief Executive Officer Pradeep Paunrana helpfully explained to Bloomberg. Producers have also recently upgraded their plants to specifically supply 52.5 grade cement to the project. Given this, it is unsurprising that local Kenyan producers, including ARM Cement and Lafarge, are complaining about this situation, especially given the increasingly pugnacious African response to foreign imports led by Dangote and companies in South Africa. Both ARM and Lafarge hold integrated plants and grinding plants in Nairobi and Mombasa. This is the route of the new railway line.
The backdrop to this is that the Chinese cement industry is struggling at home as it adjusts to lower construction rates and reduced cement production growth. Profits made by the Chinese cement industry fell by 67.6% year-on-year to US$521m for the first quarter of 2015, according to National Development and Reform Commission (NDRC) statistics. At the same time the Shanghai Composite, China's principal stock market, has seen the value of its shares fall by 30% since June.
Although it is unclear where the cement imports in this particular row are coming from, informal or formal business links between large state controlled corporations such as a China's major cement producers will always be questioned by competitors outside of China for both genuine issues of competitiveness and simple attempts to claw more profit. If the Chinese cement producers are sufficiently spooked or they really start to lose money then what is to stop it asking a sister company building a large infrastructure project abroad to offer it some help? Or it might consider asking the Chinese bank providing 90% of the financing towards the US$3.8bn infrastructure project to force the Kenyan government to offer more concessions to foreign firms. Meanwhile one counter argument goes that Kenya has a growing construction market with a giant infrastructure project that may unlock the region's long-simmering low cement consumption per capita boom. The Kenyan government may face some difficult decisions ahead.
Kenya: According to Reuters, Kenyan cement producers have said that they are being left out of a US$3.8bn railway project that China Rail & Bridge Corporation (CRBC) is building, after the company gave an assurance it would source all of the raw materials domestically.
Companies including Lafarge South Africa's Kenyan unit and ARM Cement have asked Kenya Railways Corporation, the implementing agency, to provide clarity on CRBC's local procurement plans, five months after work on the project started, according to ARM Cement CEO Pradeep Paunrana. Kenya Ports Authority data show that CRBC has imported at least 7000t of cement so far in 2015.
"There was an assurance that all of the cement would be supplied by local producers," said Paunrana, who is also chairman of the Kenya Association of Manufacturers. "There has not been transparency on how much we will supply and we don't understand why they are importing cement when we can clearly supply cement to their specifications."
The 'Standard Gauge Railway Project' (SGR) is Kenya's biggest investment in infrastructure since it gained independence from Britain in 1963. The Export-Import Bank of China is funding 90% of the railroad, which will connect Nairobi to Mombasa, East Africa's biggest port. It is scheduled to be completed by 2017. Kenya's Treasury is pinning its 7% growth target for 2015 partly on activities generated during construction of the 609km link. In June 2015, treasury secretary Henry Rotich allocated US$1.46bn to the project for the 2015 - 2016 financial year.
The SGR project requires 1Mt of cement, all to be sourced in Kenya, according to a master list of supplies that the manufacturers' association was given by CRBC. Kenya is a higher cost producer of cement than China and imports for the project are duty-free, according to Paunrana. Kenya Railways spokeswoman Mary Oyuke has said that the company isn't importing cement because the material is available locally and ARM and Bamburi are already supplying the project.
ARM and other producers, including Lafarge's unit Bamburi Cement, have upgraded their plants to produce the 52.5 grade cement required by the contractors. The enhancements cost 'several million dollars' and were commissioned on the understanding that CRBC would buy the cement from domestic manufacturers. "We undertook significant investments in an endeavour to seamlessly supply cement to the project, including long-term agreements with transport companies to make deliveries," said Bamburi CEO Bruno Pescheux. "It is our hope that the project will continue to purchase cement locally rather than import, in light of the above investments." Bamburi supplied 20,000t of cement in April 2015.
EAPCC renews hunt for COO
26 June 2015Kenya: According to Business Daily, East African Portland Cement Company (EAPCC) has renewed its efforts to recruit a new COO after the candidates who applied to fill the new position in August 2014 'fell short' of the required qualifications. EAPCC has now re-advertised the position, which is expected to strengthen its governance structure.
The Athi River-based manufacturer first sought to recruit a COO and CFO in 2014 through consultancy PricewaterhouseCoopers. Kephar Tande, the company's managing director, said that the board deemed the applicants to be unqualified. "The first attempt in 2014 did not yield a suitable candidate from the shortlisted four, hence this new advertisement," said Tande. "This position is primarily required to improve the efficiency of our supply chain to make the company more competitive. We expect the position to be filled by August 2015."
EAPCC's current management executive structure is made up of heads of sections and divisions like financial management, research and development, internal audit and risk management, as well as strategy performance improvement. The new COO will be responsible for cement production operations, production engineering, product research and development, as well as sales and marketing.
EAPPC has not said whether it will re-advertise the CFO job, also a new position. The CFO is expected to streamline financial management at the company, which has recently faced accusations of having reported inaccurate accounts. "The position of CFO will be filled as soon as internal procedures are completed," said Tande.
Bamburi Cement to plant trees at Kenya’s coast
30 June 2015Kenya: According to The Star (Kenya), a reforestation drive is targeting the counties of Mombasa, Kilifi and Kwale to achieve the internationally-recommended 10% forest cover.
Bamburi Cement has embarked on a campaign that will see 1.5 million trees planted at the coast by May 2016. It has provided 500,000 tree seedlings to each of the three county governments to do so. "We need to create a culture where the re-planting of trees is practised to avoid environmental degradation," said plant manager Peter Gibendi. He added that Kenya's coastal forests, though fragmented and small, are of critical important to the country.
Mystery company to build grinding plant in Kenya
02 June 2015Kenya: An unnamed company filed with the National Environment Management Authority (Nema) to build a new grinding plant in western Kenya on a 202,343m2 piece of land. It is projected to produce 730,000t/yr of cement.
"The plant will increase cement production in Kenya by 2000t/day. With the exception of clinker that will be imported into the country, all the other raw materials will be mined locally," said the unnamed company in its filling with Nema.
National Cement plans US$198m plant in Uganda
14 April 2015Uganda: National Cement is set to invest US$198m in a new plant in Uganda, its first plant outside of Kenya. Construction of the 1Mt/yr capacity plant, located in Mbale, will start in May 2015 and is expected to be completed by the end of 2016.
The project is the first in National Cement's regional expansion plan. The company also intends to venture into South Sudan in the next three years. "The first phase of the project is expected to commence in May 2015, after which we will continue expanding the plant over a three-year period," said Narendra Raval, the chairman of Devki Group, the parent company of National Cement. "Once the main plant is operational, we will expand it to include a clinker plant, which will ensure that we are self-sufficient." The Uganda project is being funded by loans from the International Finance Corporation (IFC) and two local banks.
The plant signals increased competition in the regional cement market, which is grappling with price wars brought about by the entry of new players and expansion of established firms. Indian conglomerate Cemtech and ARM Cement, for instance, plan to set up new plants in Pokot and Kitui respectively. Nigeria's Dangote Cement has also announced plans to build a 3Mt/yr plant in Kitui.
The increased investment is set to worsen the glut and force further price cuts, placing more emphasis on volume growth and efficiency as the major profit drivers for individual companies. The increase in output is set to offset the projected 12% increase in consumption in the region over the next three years.
Seruji buys 60% stake in Savannah Cement
31 March 2015Kenya: Mauritian company Seruji has acquired a 60% stake in Athi River-based Savannah Cement following approval from the Competition Authority of Kenya (CA).
Seruji completed the buyout from China's Wan Ho International, which held 40% and Acme Wanji, which owned 20%. Savannah Heights has retained a minority stake in Savannah Cement. The shareholding shake-up makes Savannah Cement Kenya's first fully-owned cement producer, as both Seruji and Savannah are owned by Savannah Cement founder Benson Ndeta.
The buyout comes ahead of a planned US$250m clinker plant project in Athi River by Savannah Cement, which aims to reduce its operating costs by eliminating clinker imports. Cement demand has risen steeply over the past two years in tandem with a host of several large projects in both the public and private sectors. The US$1.88bn Lamu coal power plant and the US$3.23bn standard gauge railway are among the projects that have increased domestic cement demand.
Domestic cement consumption grew by nearly 20% to hit a record 5Mt in 2014, driven mainly by robust growth in property development. However, Kenya's cement producers have been producing more cement than the market can absorb. In 2014 production hit 5.7Mt, up from 5.05Mt in 2013. The Standard Investment Bank has forecast that production will rise to 6.3Mt in 2015 and 6.7Mt in 2016.
ARM Cement’s 2014 pre-tax profit flat
26 March 2015Kenya: ARM Cement posted a pre-tax profit of US$22m for 2014, up by 1% from 2013. ARM's revenue fell by 3% year-on-year to US$150m, mainly because there was no additional capacity expansion during the year.
ARM Cement has predicted that 2015 will be better, with growth in turnover and profit.
"The cement markets continue to grow at double digits with significant demand from the infrastructure segment," said ARM in a statement. Booming economies in east Africa have buoyed cement demand in recent years, but local firms are preparing for increased competition from new entrants like Nigeria's Dangote Cement.
Spotlight on EAPCC in tyre bribery scandal
04 March 2015Kenya: East African Portland Cement (EAPCC) has been named as one of the companies that received bribes in a tyre scandal. The Capital Markets Authority (CMA) said that it was willing to work with the government to establish the truth behind the allegations that EAPCC obtained bribes before awarding tyre contracts.
"The Authority is in the process of requesting further information from the US Securities and Exchange Commission (SEC) to help in the investigations, after which appropriate determinations will be made," said the CMA. EAPCC bosses who headed the organisation in 2007 - 2011 will explain how the alleged bribery happened.
The scandal came to light recently after Goodyear Tyre and Rubber Company, which owned Treadsetters Tyres Ltd in Kenya, was ordered by the SEC to pay US$10.7m to the US Treasury after it was found liable for bribing public officials and private company bosses. According to documents from the SEC, the bribes paid by Goodyear amounted to more than US$1.5m in Kenya, while another US$1.6m was paid in exchange for contracts in Angola.
The report implicated unnamed employees from EAPCC, Telkom Kenya, Armed Forces Canteen Organisation, Kenya Ports Authority, Nzoia Sugar Company, the Kenya Air Force, Ministry of Roads and Ministry of State for Defence.
Bamburi subsidiary gets US$5m loan for operations
08 January 2015Kenya: Seruji Limited, a distribution subsidiary of Bamburi Cement, has borrowed US$5m from TriLinc Global to finance its activities at a time when competition in the industry has reached new heights.
"TriLinc funded a US$5m trade finance transaction at a fixed interest rate of 14.75% to a Kenyan cement distributor engaged in the production and distribution of cement," said TriLinc. "The transaction, set to mature on 17 March 2015, is supported by inventory, receivables and other liquid assets." TriLinc added that Seruji met one of its investment criteria of being a small or medium enterprise (SME) in its growth stage.
"Founded in 2008, the borrower is a growing Kenyan cement distributor that utilises cutting-edge energy-efficient and eco-friendly cement grinding technology to improve sustainability," said TriLinc, which has also invested in Zambian, Namibian and South African SMEs. Kenyan companies are increasingly using foreign-based lenders with the capacity to lend larger amounts and at a lower cost than local financiers.