Displaying items by tag: Tanga Cement

Germany: HeidelbergCement recorded consolidated sales of Euro14bn in the first nine months of 2021, up by 7% year-on-year from Euro13.1bn in the corresponding period of 2020. Revenues rose in all regions, except for North America, where they fell by 0.1% to Euro3.51bn. The company’s cement sales were 95.7Mt, up by 6% from 90.1Mt, while its ready-mixed concrete sales were 35.7Mm3, up by 4% from 34.4Mm3. Cement sales grew across every region, and recorded the sharpest increase in Western and Southern Europe, of 11% to 23Mt from 20.7Mt.

The group said that ‘significant’ energy cost inflation impacted upon results in the period. It launched a Euro500m cost mitigation programme and initiated the divestment of some Spanish assets and the acquisition of Tanga Cement in Tanzania.

Interesting move from HeidelbergCement this week with the news that it has agreed to buy a cement plant in Tanzania. The Germany-based multinational producer has signed a deal to buy a 68% stake in Tanga Cement from South Africa-based AfriSam. There has been no indication of the price but the arrangement will give HeidelbergCement a 1.3Mt/yr integrated plant in the north of the country along with a limestone quarry with reserves to last 30 years. The transaction is expected to close in the second quarter of 2022. HeidelbergCement says it then hopes to buy the remaining shares in the company.

HeidelbergCement already operates one integrated plant in Tanzania, Tanzania Portland Cement’s (TPC) Wazo Hill Plant in the capital Dar es Salaam. It took control of the plant in the early 2000s when its subsidiary Scancem International purchased over half of the company’s shares. The plant commissioned a new cement mill in 2014 to increase its production capacity to 2Mt/yr. Local press reported in April 2021 that the subsidiary planned to invest US$15m towards modernising the unit in 2021. It sells cement under the Twiga brand.

Tanga Cement runs a plant near Tanga that was originally commissioned in 1980. Holcim took it over in the mid-1990s before South-Africa based AfriSam assumed control in the early 2010s. The plant commissioned a second production line in 2016 and it has a production capacity of 1.3Mt/yr. It sells cement under the Simba brand.

HeidelbergCement’s decision to buy a plant in Tanzania is noteworthy because it goes against the general trend in acquisitions by western-based multinational cement companies in recent years. Instead of shrinking away from markets in developing economies and doubling-down on ‘safe havens’ in mature markets it has bought a plant in a developing country. Although one might argue that it does fit the definition of a well-chosen bolt-on acquisition.

Graph 1: Cement production in Tanzania, 2011 – 2020. Source: Tanzania National Bureau of Statistics.

As Graph 1 above shows, cement production in Tanzania has more than doubled over the last decade, from 2.4Mt in 2011 to 6.5Mt in 2020. Tanzania Portland Cement estimated local demand at 5.9Mt, including exports, in 2020. This was against a total cement production capacity, from both integrated and grinding plants, of 11Mt/yr. As well as the TPC and Tanga Cement plants mentioned above, Holcim runs an integrated plant in Mbeya and Huaxin Cement operates one near Tanga. Alongside this, new integrated plants have opened including Lake Cement’s 0.5Mt/yr Kimbiji plant in 2014 and Dangote Cement’s 3Mt/yr Mtwara plant in 2015. The big project on the horizon is a proposed 7Mt/yr integrated plant from China-based CNBM/Sinoma, although not much has been heard publicly about it since mid-2020. At that time local press was reporting that compensation was being finalised for residents of the proposed site near Tanga. Needless to say, given the size of the plant compared to the Tanzanian cement market, much of the plant’s output is intended for export.

With the CNBM plant in mind, it is noteworthy that HeidelbergCement committed to buying an extra plant in the country. Production has been going up over the last decade to presumably meet demand but the new Chinese project could potentially blot out the entire existing production. Tanzania faced a cement shortage at the end of 2020 despite coronavirus. TPC has repeatedly warned of production overcapacity in Tanzania and the challenges of competition. Yet it reported a new sales record in 2020 and growth of 7% in the national cement market. Despite a 5Mt overcapacity, TPC says it managed to adapt to the new market conditions. It also managed to grow its operating profit by 20% year-on-year to around US$46m in 2020 compared to HeidelbergCement Group’s 8% rise in results from current operations in 2020. This kind of return no doubt helped HeidelbergCement to make up its mind.

Tanzania: HeidelbergCement has signed an agreement to acquire 68% of Tanga Cement shares. Upon closing the deal in early - mid-2022, the group plans to make a public tender offer for the remaining outstanding shares in Tanga Cement.

HeidelbergCement already owns Tanzania Portland Cement, which operates a 2Mt/yr cement plant in Dar Es Salaam. Tanga Cement’s 1.3Mt/yr Tanga plant is situated in the north of the country.

Tanzania: The South Africa-based National Occupational Safety Association (NOSA) has awarded Tanga Cement its international award for safety. The Daily News newspaper has reported that NOSA considers participant companies from all industries across Africa. Tanga Cement has participated in NOSA since 2018. Managing director Reinhardt Stuart said that the achievement was especially significant as the producer retained its rating as a ‘distinguished’ class company among NOSA awarded companies.

Tanzania: Tanga Cement has won the award for the overall best-presented financial report for the 2020 financial year at the National Board of Accountants and Auditors (NBAA). The Daily News newspaper has reported that the award is the company’s fifth consecutive win in the category.

Chief accountant Isaac Lupokela said, “Everyone who prepares auditing knows that there is a competition behind that gives us a lot of motivation to do better. But professionally large accountants are the ones who make sure companies operate. Properly prepared calculations help those who use them to make better decisions.” The producer also won best-presented report in the manufacturers category.

Cement scalpers in Tanzania have been threatened with jail time for hoarding cement! The country faced a shortage of cement and other building materials in October 2020 and Prime Minister Kassim Majawali ordered an investigation into the issue following the conclusion of the presidential election earlier that month. Both regional commissioners and the National Prosecution Service have been dragged into the initiative. Director of Public Prosecutions Biswalo Mganga promised to local press that wrongdoers could face up to 30 years in prison for daring to hoard products or distort the market.

Rhetoric aside, the situation is curious given that HeidelbergCement’s local subsidiary, Tanzania Portland Cement, seemed to think in its 2019 annual report, that the country faced a 5Mt/yr overcapacity from integrated and grinding plants compared to a total production base of 10.6Mt/yr. However, the East African newspaper reported that despatches fell to 150,000t in October 2020 from 450,000t in September and August 2020, with a 30% surge in the price in some parts of the country.

In the wake of this, Dangote Cement apologised publicly for failing to communicate a planned stoppage at its Mtwara plant to the wider public. Tanga Cement then denied that its production was down. It said instead that production was at the highest level and that large chunks of its output was servicing government-backed infrastructure projects like the Standard Gauge Railway (SGR) and the Kigongo-Busisi Bridge, which will span the southern end of Lake Victoria. It also blamed a lack of trains on the Tanga-Moshi, which was reopened in mid-2019. It seems reasonable that cement prices might vary quite markedly, even before the profiteers got involved, due to the reasons above. Other issues locally include poor transport links, long distances in a country like Tanzania, the recent election and lingering hiccups from the blockage of imports from Kenya in 2018 that may not have helped either. The investigation continues.

A wider issue here is how much cement production capacity the country and the region can support given a propensity for spikes in prices. As Global Cement has covered previously (GCW456 and prior issues) Chinese producers have been heading into Sub-Saharan Africa over the last decade. Huaxin Cement bought ARM Cement’s assets in Tanzania in May 2020. It renamed the company African Tanzanian Maweni Limestone and then started trial production of clinker at the newly upgraded 0.75Mt/yr Maweni Limestone clinker plant in July 2020. Depending on how long ARM Cement’s former subsidiary was out of action, this one seems unlikely to rock the market too much. Tanga Cement also took the opportunity in November 2020 to say that talks with the government about a new 0.5 – 0.75Mt/yr grinding plant in Arusha were progressing

The proposed 7Mt/yr CNBM/Sinoma ‘mega’ plant is another matter entirely. Most of its output is intended for export but any disruption to local transport links, current or future, could swamp the local market. The export of Chinese infrastructure development around the world through its loan system could offer (occasionally literal) bridging solutions here as cement from a Chinese-backed factory is used to build the transport networks backed by Chinese loans that allow exports to proliferate. Tanzanian President John Magufuli’s comments that the poor terms for a US$10bn Chinese loan supporting a port project could “…only be accepted by a drunken man,” may not have helped international diplomacy. Still, Chinese money is actively getting things built here and elsewhere around the world at a rate previously unheard of.

Returning to the present, it makes a change to highlight a market where cement is truly demanded. A coronavirus-related lockdown may have slowed sales in the first half of 2020 but Dangote Cement estimated that the total market for cement in Tanzania was about 4.2Mt in the first nine months of 2020 and it reported its highest ever orders and dispatches in September 2020. That the country’s prime minister decided to discuss cement prices is a reminder of how important the commodity remains in parts of the world.

Tanzania: Tanga Cement says that talks with the government about a new 0.5 – 0.75Mt/yr grinding plant in Arusha are progressing. Discussions about the project with the authorities originally started in 2016, according to the Daily News newspaper. At present the cement company transports cement to the region using a freight train that was recently inaugurated.

Tanzania: Tanga Cement says it expects to reduce its losses by around 50% in 2018. It said that the local cement market improved notably in 2018 and that the cement producer improved its trading results and profitability, according to the Daily News newspaper. In 2017 the company reported a loss of US$11.5m due to local competition.

Kenya: ARM Cement’s net loss more than doubled to US$55m in 2017 due to poor demand in Kenya and Tanzania. Its sales fell by 32% year-on-year to US$85m from US$127m. Elections in Kenya reduced cement demand, a coal import ban in Tanzania caused production issues at its Tanga cement plant and both countries saw increased competition.

“2017 was the most challenging for the group since the company’s listing on the Nairobi Securities Exchange in 1997. Whilst the management has navigated many business difficulties well in the past, raised capital for expansion, increased net profits and market capitalisation continuously over a 14 year period up to 2015, the challenges of the past year have been unprecedented,” the company said in a statement.

The cement producer says it is undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems. It has also been cutting staff benefits as part of its plan to save money.

UK-government investor CDC Group, which holds a 41% stake in the company, has also replaced its board members Ketso Gordhan and Pepe Meijer with Sofia Bianchi and Rohit Anand.

Tanzania: Tanga Cement’s earnings have fallen significantly due to low cement prices. It operating earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 72% year-on-year to US$2.26m in the first half of 2017. However, its sales revenue grew by 2% to US$35m from US$34.2m.The cement producer cut its prices in response to competition, raising its sales volumes and increasing its market share.