Displaying items by tag: Nigeria

Nigeria: Lafarge Africa has reduced the size of its board of directors to 11 members from 17. The African subsidiary of LafargeHolcim increased the size of its board followings its formation but following its annual general meeting it has now agreed to decrease it once more. Joe Hudson, Jean-Christophe Barbant, Oludewa Edodo-Thorpe and Thierry Metro have all resigned voluntarily with effect from 8 June 2017.

Nigeria: Mallam Suleiman Yahyah has resigned as chairman from AshakaCem. Yahyah joined the board of directors of the subsidiary of LafargeHolcim in 2010 and became its chairman in 2015.

Nigeria: Adepeju Adebajo has resigned as an executive director of Lafarge Africa. Adebajo was the Managing Director, Wapco Operations and then Managing Director, Geo-Cycle and Project Management Office at Lafarge Africa. Her resignation from Lafarge follows her appointment as the Honourable Commissioner for Agriculture in Ogun State.

Shock news this week: Dangote Cement has decided to slow its expansion in Africa. The announcement from CEO Onne van der Weijde topped a half-year financial report that trumpeted high revenues and sales volumes of cement but one that also had to explain why earnings before interest, taxes, depreciation, and amortisation (EBITDA) had fallen by 10% year-on-year. The decline was blamed on lower cement prices and higher fuel costs, as well as the costs of setting up new cement plants.

The mixed bag of results can be demonstrated by a 38.8% leap in cement sales volumes in Nigeria to 8.77Mt for the half year. Dangote attributed this in part to price cut in September 2015. This then netted an increase in revenue of 4.2% to US$677m but its EBITDA in Nigeria fell at a faster rate than the group total.

As an indication of some the pressures facing Dangote at home, it reported that its fuels costs rose by 32.3% to US$14.4/t in the reporting period. The backdrop to this has been the general poor state of the Nigerian economy. The International Monetary Forum (IMF) forecast that its gross domestic product (GDP) will fall by 1.8% in 2016 in its World Economic Outlook Update published in mid-July. Given that over three-quarters of Dangote Cement’s sales revenue came from Nigeria in 2015 this might explain the decision to slow its expansion plans down.

Outside of Nigeria, Dangote did extremely well in its West & Central Africa region, pushing up sales volumes, revenue and EBITDA by triple figure percentages helped by commissioning of a new plant in Ethiopia. Exports were also highlighted as a key part of this region’s strategy to neighbouring countries. It also stated that its recent procurement of about 1000 trucks in Ghana would ensure that an increased share of that country’s imported cement would come from Dangote’s Ibese plant in Nigeria. South & East Africa was a different story, however with sales volumes and revenues rising as new cement plants bedded in but the region was dogged by currency devaluations and poor economies.

Dangote Cement’s response to its current situation is to protect its margins through cost cutting, by adjusting its prices and by slowing its expansion strategy to a five-year programme. However, it isn’t alone in its struggles to preserve profit in its Nigerian business. LafargeHolcim also reported a ‘challenging’ market in its first quarter results for 2016. Its cement sales volumes fell in that quarter due to what it said were energy shortages and logistics-related issues. Its mid-year financial report, out on 5 August 2016, will make interesting reading to see if its experience in Nigeria matches Dangote’s.

Elsewhere, it appears that both PPC and LafargeHolcim have also been struggling in South Africa. PPC’s revenue from cement sales within the country fell by 5% year-on-year to US$171m its half-year to the end of March 2016. It blamed the drop on increased competition. LafargeHolcim noted similar problems in South Africa without going into too much detail in its first quarter.

With the Nigeria Naira-US Dollar exchange rate devalued by over 50% since the start of 2016 and the Nigerian economy bracing itself for a recession, it seems unlikely that Dangote Cement could do anything else than slow down its expansion plans given how much of its revenue comes from within Nigeria. As we also report this week, PPC is in a similar bind. Its CEO had to reassure shareholders that the group’s new plant in Zimbabwe would be finished on schedule later in the year. Controlling imports and exports of cement in Africa has suddenly become more important than ever.

Both companies need to expand internationally to protect themselves from regional economic downturns but the current situation in each of their home territories is preventing this. In the meantime their own export markets are set to become more important than ever. Any target markets that declare themselves ‘self-sufficient’ in cement will be a big impediment to this.

Nigeria: Lafarge Africa has appointed Michel Puchercos as its new group Managing Director and chief executive officer. He assumed his post on 1 April 2016. He replaces Peter Hoddinott.

Puchercos, a French national, started his career in 1982 at the French Ministry of Agriculture before working at other companies in the biochemistry and food industry. He joined Lafarge as Head, Strategy and Purchasing in Orsan, Lafarge Biochemistry, and in 1998 became Director of Cement Strategy and Information Systems, Lafarge Gypsum. Puchercos became the Director of Cement strategy, Lafarge Group in France in 2003 before becoming the CEO for Lafarge operations in Kenya and Uganda in 2005. He then became the CEO of Lafarge South Korea in 2009.

Puchercos is a graduate of Ecole Polytechnique, and the National School of Rural Engineering, Waterways & Forests, France.

Nigeria: AshakaCem, a subsidiary of Lafarge Africa and member of the LafargeHolcim group, has appointed Alhaji Rabiu Abdullahi Umar as its new managing director. AshakaCem said in a statement that Umar was appointed to succeed Leonard Palka, a Polish national, who has resigned from the company.

AshakaCem in Gombe State is one of the four cement companies controlled by Lafarge Africa in Nigeria. Formerly the companies were known as Lafarge Cement WAPCO Nigeria before the name was changed in 2014.

Dangote Cement released its financial results for 2015 this week and certain numbers are more interesting than others. The headline that the company would probably like us to look at is a 14% rise in profit from significantly higher revenues. However, we would like to look at Dangote’s capacity and production figures. We have spoken about Dangote’s ambitions in this column in recent years and it is very likely that the topic will come up again in the future. But Dangote’s ambitions are increasingly becoming a reality for markets all around Africa. How are its pan-African expansion plans turning out?

Dangote Cement reported that cement production volumes were up by 35% in 2015 compared to 2014. This was due almost entirely to Dangote’s new plants outside of its native Nigeria. While its Nigerian cement production volumes rose from 12.9Mt in 2014 to 13.3Mt in 2015, production elsewhere came in at 5.6Mt, more than five times the amount that Dangote produced outside of Nigeria in 2014. This rapid rise was the result of the first cement being produced at its plants in South Africa, Senegal, Cameroon, Ethiopia and Zambia.

As Dangote has expanded into these new markets, we have heard much about the effects of its new capacity from other producers. In South Africa, long-established players have had to deal with falling cement prices due to the inauguration of Dangote’s Sephaku Cement subsidiary. In Zambia, Zambezi Cement was forced to lay off workers in 2015, citing the opening of Dangote’s new facility as a significant contributing factor. More recently, in February 2016, Ghana announced an investigation into Dangote’s operations in the country following accusations of ‘predatory pricing’ by its competitor Diamond Cement. The investigation is ongoing.

However, the complaints heard to date could really start to ramp up over the course of 2016 as Dangote starts to realise its full potential across Africa. Its cement production volumes may have risen by 35% in 2015 relative to 2014 but its capacity rose by an incredible 87%, with Dangote now claiming a capacity of 44Mt/yr! The capacity utilisation rate is just 43% and the inference is that the ex-Nigerian plants have not yet realised anything like their full potential. Local producers the length and breadth of Africa may well be looking at this situation with dread.

And ramping up its production in 2016 is by no means the end of Dangote’s pan-African vision, with new plants under construction in Nepal, Kenya and Zimbabwe. As well as new plants outside of Nigeria, Dangote cement capacity within Nigeria is also set to rise. It recently announced a further 9Mt/yr of capacity at two new plants. With exports to its smaller neighbours already causing consternation, this will surely add fuel to the fire for local producers like Diamond Cement.

So far in 2016, the news continues to be promising for Dangote. January 2016 sales volumes rose by 77.6% to 2.0Mt, with Nigerian sales up by 46.4% to 1.4Mt. February 2016 sales volumes were 38% better than a year earlier, with Nigerian sales up by more than 60% year-on-year to more than 1.5Mt.

At the end of its report, Dangote says that it expects to have around 77Mt/yr of cement capacity by the end of 2019. If realised, this capacity would be enough to put it up to sixth on the Global Cement Top 100 list by 2016 standards. It would have around 28% of Africa’s entire cement capacity, according to the Global Cement Directory 2016 and would be only 10Mt/yr behind the 87Mt/yr of cement capacity currently held by the established multinational player Cemex. That is truly a number to pay attention to!

Nigeria: Dangote Cement has appointed two new Regional Chief Executive Officers (RCEOs). Arvind Pathak has been appointed as the new regional Chief Executive Officer of Nigeria and Vivek Chawla will serve as the new Regional CEO for West and Central Africa. Chawla was appointed on 17 August 2015.

Chawla has over 30 years of experience working in the cement industry. Previous to working for Dangote he was the President of Hindalco Industries, part of the Aditya Birla Group. Chawla also worked as Chief Executive Officer, East Region of ACC Limited.

Nigeria: Former Lafarge Zimbabwe chairman Johnathan Shonhiwa has joined Dangote Group. Shonhiwa, who resigned from Lafarge Zimbabwe recently, was chairman for almost two years after having taken over from Muchadeyi Masunda in January 2014. Prior to that, he was managing director of Lafarge Zimbabwe for six years, finance director for four and a half years and finance manager for two years.

The small cement industry of Mozambique, in south west Africa must be an interesting place to make cement. On one side the country's producers, like their more vocal South African counterparts, have been fighting off cheap imports from Iran, Pakistan, China et al. On the other side of the coin though, Mozambique has growing domestic demand and is within striking distance of growing markets further into Africa, like Malawi and the Democratic Republic of Congo (DRC).

With the announcement this week that there will be not one but two new integrated cement plants in the country, bringing over 2Mt/yr of new capacity, everything should be set fair for the coming years then, shouldn't it? Domestic production will rise, the price of local cement will fall as a result, competition from imports will drop off and money will be made from new exports.

Except that might not happen. Before the announcement of these two plants, (one of which does not state a capacity), there was around 5.5Mt/yr of grinding and integrated capacity either currently active in Mozambique or due to come onstream in 2015. With the new projects this rises to over 7.5Mt/yr.

The desirable chain of events described above starts to break down due to the fact that domestic demand in Mozambique, while rising, is not currently anywhere near as high as domestic supply. The United States Geological Survey estimated that the country produced just 1.2Mt/yr in 2012. Data for 2013 and 2014, though unavailable, is highly unlikely to show a three-fold increase. Indeed Insitec, a minority shareholder in Cimentos de Moçambique, predicted in 2014 that demand for that year would rise to just 1.5Mt, before hitting the dizzying heights of 1.8Mt in 2018 – And that's still three years away!

So what are the options? Option 1: Some or all of the planned and mooted cement plants will fail to come to fruition. Option 2: Some or all of the plants will be built but will operate at reduced capacity and/or on a campaign basis. Option 3: The Mozambican cement industry becomes a regional powerhouse and starts to export to its neighbours.

Option 1 is certainly possible. Limak Group, one of the parties linked to the new projects, is a Turkish cement producer that is inexperienced outside of Turkey. There has also been a lack of information on the progress of projects by Austral Cimentos ('coming on stream in 2015'), Star Cement and Consolidated Building Materials, although a lack of progress reports does not necessarily imply 'no progress.'

Option 2 is more likely, as some producers already operate on a campaign basis. InterCement's plant at Nacala, formerly an integrated plant, currently operates only as a grinding station. Option 3 is also possible, with Malawi particularly lacking in cement production facilities.
In reality a combination of all three 'Options' is the most likely outcome. However, this will lead to Mozambique becoming yet another player in an increasingly busy African cement market. The desire for self-sufficiency in cement production, a common goal for the region's governments, can easily lead to over-estimates of local demand growth, with resultant over-capacity. Of course the expectation that all African countries can get rid of this extra cement capacity via exports will ultimately backfire.

In southern Africa we already have South Africa exporting. Angola declared 'cement self-sufficiency' in October 2014 and banned imports at the start of 2015. Zambia, Botswana, Zimbabwe and DRC all have large-scale Dangote and/or PCC projects near completion or in production that will greatly reduce their need for imports. Meanwhile, further north, Nigeria is already a gigantic producer and significant cement exporter. Cameroon has recently banned imports and Ghana is thinking of doing the same. Over in the east of Africa, Ethiopia's (and the rest of that region's) rapidly-developing situation was covered in this column just two weeks ago.

Finally, in the north of Africa, Algeria has declared its intention to be self-sufficient in cement by 2016. This news must have 'gone down like a lead balloon' in Italy, Spain and Greece, which have been reliant on north African markets after the bottoms fell out of their own economies. In the north east, Egypt has different problems at present, also described previously. It needs fuel not cement!

So where does this all lead for regional cement dynamics in Africa? Well perhaps the situation in India points the way. There, as in Africa, local and regional producers with the desire to expand grew from their local bases and eventually overlapped. Against a backdrop of lower-than-expected demand, the country now has overcapacity. This has resulted in smaller producers being acquired and leaving the market.

Could this eventually happen in Africa? Only time will tell. However one thing is certain: It's just not possible for every country to export to every other country!