Displaying items by tag: Sephaku Cement

Mining and materials company Afrimat said it was buying Lafarge South Africa this week. The assets it is acquiring include aggregate quarries, ready mix concrete (RMX) batching plants, one integrated cement plant, two cement grinding plants, cement terminals and fly-ash sources. The means of purchase is somewhat unusual, as Afrimat is paying around US$6m but it also appears to be taking responsibility for around US$50m of outstanding debt that Lafarge South Africa owes its parent company, Holcim. In a statement Afrimat’s chief executive officer (CEO) Andries van Heerden talked up the benefits for his company in terms of the boost to its aggregates and concrete businesses.

This is quite the change from 2012 when India-based Aditya Birla Group was reportedly looking into buying Lafarge South Africa. At this time the value for the business for a similar mix of assets, including 55 RMX plants and 20 quarries, was said to be to US$900m. Prior to this, Lafarge South Africa spent around US$170m in the late 2000s on increasing the production capacity at its integrated Lichtenburg plant and building its Randfontein grinding plant. Then in 2014, when the merger between Lafarge and Holcim was announced, Lafarge consolidated its Nigeria-based and South Africa-based operations as Lafarge Africa. It later decided to move the South African business to another Holcim subsidiary, Caricement, in 2019 to keep the business in Nigeria more profitable by reducing its debts. This transaction was valued at US$317m. At the time chair Mobolaji Balogun said that Lafarge South Africa’s operations had faced a challenging market in South Africa, with shrinking demand in an aggressively competitive sector. Afrimat is now buying Lafarge South Africa and its subsidiaries from Caricement.

Holcim isn’t alone in making an effort to sell up in South Africa. In April 2023 the Valor Econômico newspaper reported that Brazil-based InterCement was receiving offers for its remaining African-based assets in Mozambique and South Africa with a potential deal valued at around US$300m. InterCement runs Natal Portland Cement in South Africa, which operates one integrated plant and two grinding units. This follows the sale of its Egypt-based assets in January 2023 to an unnamed buyer.

PPC, the country’s largest cement producer, is staying put. However, it issued a mixed trading update this week ahead of the formal release of its annual results to 31 March 2023. Trading conditions in the interior of South Africa and Botswana were described as being ‘difficult,’ with cement sales volumes down by nearly 6% year-on-year and earnings before interest, taxation, depreciation and amortisation (EBITDA) down by 26%. Yet the group says it was able to grow its revenue. PPC’s CEO Roland van Wijnen added, “We therefore remain hopeful that the South African government will roll out its infrastructure development plans and protect the local cement market through the introduction of import tariffs to create a level playing field for domestic producers.” Dangote Cement subsidiary Sephaku Cement was more circumspect in its recent trading update but it too warned that, “deteriorating economic conditions and persistent challenges in the cement industry impacted Sephaku Cement’s financial performance to break-even levels.”

Much of the above makes for gloomy reading. As the local trade association Cement and Concrete South Africa (CCSA) has laid out to local media, the market faces the problem of having 20Mt/yr of production capacity, 12Mt/yr of demand and over 1Mt/yr of imports compounding the problem. Lobbying by local producers against imports has been a feature of the market since the early 2010s and this work continues through the efforts of the CCSA and others. However, the plea by PPC for government infrastructure spending suggests that the market faces more systemic problems. As a consequence some cement producers are trying to leave the market, while others are attempting to tough it out.

South Africa: Sephaku Cement has reported a second unexpected kiln stoppage at its integrated Aganang plant in Lichtenburg. It attributed the second delay on the need for a repair to the inside of the kiln. The second stoppage started on 16 October 2021 and was expected to be completed by 26 October 2021. Previously, the kiln was stopped from 30 September 2021 to 6 October 2021 due to preheater refractory material damage caused by a corrosive element in one of the raw materials being used. The producer said that the raw material was subsequently replaced with an alternative option. The subsidiary of Nigeria-based Dangote Cement said that the outages were expected to reduce its sales volumes.

South Africa: Pieter Fourie, the chief executive officer of Sephaku Cement, has died. He passed away on 19 May 2021 following suffering a stroke earlier in the month. He is survived by a wife, three children and five grandchildren.

Fourie became the head of the subsidiary of Nigeria-based Dangote Cement in 2007. He later became a board director of the company in 2009 after its stock market listing. His previous roles included being marketing director of Blue Circle, which was subsequently acquired by Lafarge South Africa, the managing director of the cement business unit of Lafarge South Arica and Strategic Development Director for Africa based at the Lafarge head office in France. Fourie’s role at Blue Circle included sales, distribution and marketing before being promoted to managing director of the cement business. He subsequently accepted the assignment at Lafarge’s head office in a strategic development role to integrate the newly acquired business in Africa into Lafarge’s portfolio.

South Africa: Duan Classen, the Operations Executive of Sephaku Cement, has been appointed as its acting chief executive officer (CEO) following the admission of Pieter Fourie to hospital. The cement producer said that Fourie, its current CEO, had been receiving medical care after suffering a stroke and was responding well to treatment.

Classen has been a member of the executive management in charge of operations since the construction of Sephaku Cement’s plants. He holds a bachelor degree in Metallurgical Engineering from the University of Pretoria, and has previously participated in the Young Managers Development Programme at INSEAD in France and a Management Development Programme at Duke University in the US. Classen completed his graduate engineer training at De Beers before joining Blue Circle Cement in 1997, where he was involved in Blue Circle Cement's integration into Lafarge in 1998. He subsequently worked for PPC before being appointed to DCSA in early 2008.

South Africa: The board of Sephaku Holdings, owner of Sephaku Cement and 36% owner of Nigeria-based Dangote Cement, has re-elected Kenneth Capes as chief executive officer (CEO) of Métier Mixed Concrete. The board also re-elected Capes as an executive director of Sephaku Holdings, a position he first attained in 2013. He co-founded Métier in 2007.

There have been rumours in the press this week that LafargeHolcim is weighing up its options in South Africa. Reports in the local press allege that the building materials company has tasked Credit Suisse Group with finding a buyer for its business. This may or may not be true, only time will tell, but South Africa certainly feels like a market where LafargeHolcim should be considering its future.

As a prominent but smaller producer in the country, Lafarge South Africa is behind PPC and AfriSam in terms of clinker production capacity. InterCement’s subsidiary Natal Portland Cement and Dangote’s subsidiary Sephaku Cement have a similar production base with an integrated plant each and one or two grinding plants. Halfway through 2019 LafargeHolcim was describing market conditions as ‘difficult’ in the country with it being the sole Sub-Saharan market holding back regional growth for the group. By the third quarter the situation had reportedly improved but net sales and cement sales volumes were flat for the year to date. A clearer picture should emerge when LafargeHolcim publishes its fourth quarter results at the end of February 2020.

PPC provided its view of the market in its half-year results to 30 September 2019. Its estimate was that the South African cement industry declined by 10 - 15% for the period, creating a competitive environment. It added that the situation had been, ‘exacerbated by imports and blender activity.’ Both its revenue and earnings fell year-on-year, although a 30% rise in fuel costs didn’t help either. Sephaku Cement suffered a similar time of it, with a 19% fall in cement sales volumes during the first half, although it reported improvement in the subsequent quarter. Overall, it blamed falling infrastructure investment for pressurising the market and allowing blending activity to mount. Sephaku Cement was also wary of the local carbon tax that started in June 2019 warning of a potential US$2.8m/yr bill.

PPC noted that cement imports had risen by 5% to 0.85Mt in the year to August 2019. This followed a lobbying effort by The Concrete Institute (TCI) in mid-2019 to implore the International Trade Administration Commission (ITAC) to look into rising imports levels. At the time the TCI’s managing director Brian Perrie expressed incomprehension that a country with six different cement production companies with an over-capacity rate of 30% could be facing this problem. This latest broadside tails South Africa’s previous attempt to fend off imports when it instituted anti-dumping duties of 17 – 70% against importers from Pakistan in 2015. Imports duly fell in 2016 but rose again in 2017 and 2018, mainly from Vietnam and China.

All of this sounds familiar following LafargeHolcim’s departure from the ‘hyper-competitive’ South-East Asian countries in 2019. Those countries also suffered from competition and raging imports. Bloomberg pointed out in a report on the local industry in 2016 that PPC’s, AfriSam’s and LafargeHolcim’s kilns had an average age of 32 years, suggesting that efficiency and maintenance were going to be concerns in the future. Also of note is LargeHolcim’s decision to move its South African operations from one subsidiary, Lafarge Africa, to another, Caricement, in mid-2019.

Some level of market consolidation would certainly help local overcapacity. Plus, surely, LafargeHolcim’s mix of inland integrated capacity and a grinding plant near the coast could prove enticing to some of the Asian companies pumping out all of those imports. The thought on the minds of potential buyers everywhere must be, if LafargeHolcim chief Jan Jenisch was bold enough to sell up in South-East Asia, how can he not in South Africa?!”

South Africa: Sephaku Cement estimates it will have to pay up to US$2.8m/yr as part of South Africa’s new carbon tax. The new tax started in June 2019. The subsidiary of Nigeria’s Dangote Cement said that it would apply the tax on its products based on the proportion of clinker per tonne. This would work out at between a 1.5% and 2.5% price increases on lower strength and high strength cement respectively.

In a financial report to 31 March 2019 the cement producer said that its cement sales volumes fell by 6.4% year-on-year due to low cement demand was exacerbated by increases in value added tax (VAT) and fuel prices during the first and last quarter of its financial year. Its sales revenue fell by 3.1% to US$162m and its net profit rose to US$9.08m but only due to a tax credit.

South Africa: Sephaku Cement’s revenue fell by 3.1% year-on-year to US$161m in 2018 from US$167m in 2017. Its net profit dropped by 19% to US$3.3m from US$4.07m. The subsidiary of Nigeria’s Dangote Cement said that the general poor economy in the country led to an estimate 5 – 10% decline in industry sales volumes. It blamed ‘intense’ competition between clinker grinding plants, producers and importers. Its sales volumes of cement fell by 6.4%.

South Africa: Sephaku Holding’s revenue rose by 5% to US$32.1m in the six months to 30 September 2018 from US$30.7m in the same period in 2017. Its profit nearly doubled to US$1.8m. The subsidiary of Nigeria’s Dangote Cement said that cement prices had increased in most markets. It added that competition from cement importers and grinding plants had placed pressure on its cement sales volumes in the Kwa-Zulu Natal province in the latest quarter.

South Africa: Sephaku Cement says that its earnings for its 2018 financial year that ended on 31 March 2018 are expected to fall by up to 40% to US$3m. It has blamed this on a poor start to the year from its cement business, the impact of one-off income from a closure agreement with Sinoma regarding the opening of a new cement plant on the previous year’s results and poor results from its concrete business.