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Nigerian cement industry upheaval
Written by Global Cement staff
21 May 2014
Following the Standards Industry of Nigeria's (SON) decision earlier this week to ban 32.5 grade cement for all applications except for plastering, the country's cement industry is likely to be faced with some difficult decisions. The new rules state that 42.5 grade cement must be used for casting of columns, beams, slabs and for moulding blocks, while 52.5 grade cement is now mandatory for building bridges. As a developing country, Nigeria is home to a large number of construction and infrastructure projects. To ensure safety this means that the construction industry must be well-regulated.
Arguments against the use of low quality cement in Nigeria have been long drawn out as low quality cement has been blamed for a spate of building collapses, resulting in the deaths of 297 people in 1974 – 2010.
In support of the country's cement producers, SON's director general Joseph Ikem Odumodu was eager to point out that low quality cement is not to blame for Nigeria's building collapses. He said that cement grades 32.5, 42.5 and 52.5 are designed for different applications, which are not being adhered to by builders. While 42.5 grade cement is the minimum suitable grade for multi-story building construction like residential homes, 32.5 grade cement is frequently used instead as it is cheaper and more readily available.
Dangote Cement is currently the only company producing 52.5 grade cement in the country, which it sells at the same price as its 42.5 grade cement. The new SON decision is therefore expected to be good news for Dangote, potentially increasing sales volumes and improving the company's reputation.
With regards to the rest of Nigeria's cement producers, unless they are able to convert their production process for 42.5 and 52.5 grade cement extremely rapidly, Nigeria's cement imports and prices for domestic 42.5 and 52.5 grade cements are likely to increase, in contrast to recent trends. The new regulations, which SON has said will be strictly enforced, provide an excellent opportunity for market share expansion to those cement producers that respond rapidly. It might also be considered the ideal moment for companies to begin exploring brand identities and marketing campaigns. Lookout for our new report on cement branding in a future issue of Global Cement Magazine.
JK Cement appoints new additional director
Written by Global Cement staff
21 May 2014
India: JK Cement has announced that the Board of Directors has appointed Paul Hugentobler as an additional director in the Board, to hold office until the conclusion of the next Annual General Meeting. Previous to the appointment, Hugentobler served as an advisor to Holcim between 1 January 2014 to February 2014. Between 1999 – 2000 he was the CEO at Siam City Cement and between 1980 – 1994 Hugentobler was a project manager at Holcim Group Support.
Mexico: Cementos Moctezuma has announced US$200m of investments to increase its cement production capacity by 1.3Mt/yr to 2.6Mt/yr at its plant in Apazapan, Veracruz. The company, which is owned by Buzzi Unicem, Cementos Molins and Carso, runs three plants in Mexico with a total production capacity of 6.4Mt/yr. Moctezuma's income grew by11% to US$164m in the January - March 2014 period.
EAPCC expects sharp drop in full-year profit 21 May 2014
Kenya: 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.
South Africa: PPC has announced that in the first-half of its 2014 financial year, which ended in March 2014, its profit grew by 52% as the company consolidated its foreign units and increased its exports to counteract declining domestic sales.
Net income for the six months grew to US$47.2m from US$31.1m for the same period in 2013. Operating earnings before a number of one-time items rose by 3% to US$84.6m, while sales grew by 9% to US$398m.
Cement sales in South Africa were negatively impacted by a platinum mining strike and heavy rains during the period. Sales volumes in the north west of the country, where many of the platinum mines are located, fell by 25% in the first six months of PPC's reporting period and are not expected to recover in the near future.
"Improvements in export sales and the consolidation of sales from our Rwanda operation and newly-acquired Safika Cement business were partly offset by declining sales volumes in South Africa and Botswana," said chief executive Ketso Gordhan. PPC said that it remains optimistic that cement sales volumes will improve.
To combat a slow domestic market, PPC is expanding across Africa, including in countries such as the Democratic Republic of Congo (DCR), Zimbabwe, Algeria and Mozambique, to boost foreign sales to 40% by 2017.
PPC said that Zimbabwe's economic slowdown had caused 'in-country liquidity constraints,' resulting in a fall in cement demand. Despite the slowdown, analysts have said that the country's infrastructural deficit presents immense opportunities for cement makers. PPC is investing US$12.4m to expand its cement plant in the country and plans to construct a 0.70Mt/yr cement plant under its subsidiary, PPC Zimbabwe. PPC also plans to retire two 'less-efficient' mills at its Bulawayo plant. "The new mill in Harare gives a competitive advantage and a phased capital expenditure approach reduces risk," said Gordhan.
Gordhan said that PPC plans to construct a US$200m clinker plant on the border with Mozambique and a cement plant in Tete, Mozambique.
In the Democratic Republic of Congo (DRC), PPC is investing US$280m to build a 1Mt/yr cement plant in the west of the country. The plant is currently under construction. PPC will assume 69% ownership of the plant, while the Barnet Group will own 21% and the International Finance Corporation will own 10%.
Hodna Cement Company, in which PPC has a 49% interest, plans to construct a 2Mt/yr cement plant near Sétif, Algeria to be constructed by China's Sinoma. "We are optimistic that we will be on site by the end of 2014," Gordhan said. Algerian cement demand is estimated at 22Mt/yr.