Displaying items by tag: Dangote Cement
Dangote breaks cover
20 August 2014Of the five African cement news stories in this edition of Global Cement Weekly, three concern the actions of Nigerian cement giant Dangote Cement. This week it has announced a new captive power plant in Nigeria and the fact that Sephaku Cement, which is owned by Dangote to the tune of 64%, is now in a position to produce cement from its Aganang plant in South Africa. These two items are fairly typical of the type of announcement that Dangote makes in the African market, and the high frequency with which it makes them. It is the third story, of course, which is unusual.
We have heard, for a couple of years now, that Dangote has designs on becoming a pan-African cement giant. Certainly it is the pre-eminent producer in west Africa, with its influence rapidly spreading to the east, north west and south of this vast continent. Few others, (but perhaps South Africa's PPC), can claim to have such influence and, unopposed, there seems no limit to Dangote's ambitions.
This week we heard just how bold those ambitions are. For the first time Africa's No. 1 cement producer has said that it wants to break out of Africa and enter new markets. No longer satisfied with operating at home, a company release has identified the Middle East and Latin America as potential hunting grounds, either for new capacity or acquisitions. The proposed list of LafargeHolcim cast-offs, which includes few assets in either region (LINK), will also have received significant attention in the Dangote boardroom.
The selection of the Middle East and Latin America, however, is not accidental. The Middle East is a high growth area and provides a platform for possible 'pincer-movement' expansion into more impenetrable markets in central Africa like Chad and (South) Sudan. The Middle East also means proximity to India. Dangote may also want to dampen the influence that Indian, Pakistani and Iranian exports have in the region. Potential tie-ups with Dangote's growing operations in east Africa are clear.
The selection of Latin America, on the face of it at least, is less obvious. There are numerous strong and growing local and regional producers. Not least of these is Colombia's Cementos Argos, which has increased its influence in the USA through strategic acquisitions. There are also numerous domestic large Brazilian producers but Dangote may feel like there is room for more to joint the party. Cade, the Brazilian competition authority, has certainly agreed that competition could be improved in Brazil following its recent investigations. Could Brazil be a prime target?
Wherever Dangote decides to play its first non-African card, it will be a major step for the company and African cement producers. How long until we see the first African-owned cement plant on another continent?
World: Dangote Cement is preparing to expand its cement production plants beyond the continent of Africa to the Middle East and Latin American countries. The company is optimistic that the planned investment will propel it to be ranked among the top 10 global cement manufacturers.
"We are currently operating in 14 African countries and we shall soon move across the continent to other continents," said Sunday Adondua, deputy general manager of production at the Ibese plant in Nigeria. "By the time we have consolidated our hold in the African markets, we shall go beyond the borders. Specifically, we are targeting the Middle East and Latin America. The idea is to be a world leader in cement production. We are also planning to start a plant in Mauritania and we are also planning projects in Gabon."
The Dangote Ibese plant in Nigeria has undergone recent upgrades, including the construction of new production lines. Lines 3 and 4 will be commissioned by the end of 2014, which will double the plant's cement production capacity to 12Mt/yr. Line 3 is complete and line 4 is 96% complete. As a result of the works, Dangote's three Nigerian cement plants in Ibese, Obajana and Gboko, will have a combined production capacity of 29.2Mt/yr.
Sephaku Cement set to produce clinker at Aganang plant
20 August 2014South Africa: Sephaku Cement, an associate of Sephaku Holdings, has completed the commissioning of the Aganang clinker plant in Lichtenburg, North West Province and is ready to commence production. Lelau Mohuba, the chief executive of Sephaku Holdings, said that the first consignment of clinker would be delivered to Sephaku Holdings' Delmas grinding plant by the end of August 2014. The Aganang plant also has a cement production capacity of 1.1Mt/yr.
Commercial production at the Delmas grinding plant commenced in January 2014 following a successful commissioning phase. Once it is operating at full capacity, it will be capable of producing 1.4Mt/yr of cement. About US$312m has been invested in establishing these new cement plants, which will have a total annual capacity of 2.2Mt/yr once they are fully operational.
Sephaku Holdings has a 36% stake in Sephaku Cement, with the remaining 64% owned by Dangote Cement. Mohuba said that the production of its own clinker was an important step for Sephaku Cement in enabling it to become a fully-integrated producer of cement. Mohuba said that Sephaku Cement had to date been purchasing clinker to grind at Delmas, where the company had achieved more than 60% capacity utilisation. He said this had enabled Sephaku Cement to enter the market while strengthening its sales function in preparation for increasing volumes.
Dangote invests US$250m in coal power plant
18 August 2014Nigeria: Dangote Group has invested US$250m in a coal-based power plant in its effort to provide an alternative source of power for is plants across the country to reduce the cost and difficulty accessing electricity.
Dangote Cement's Group CEO, Devakumar Edwin, said that the initiative will help the group in running its businesses in all parts of the country. He noted that the group has installed a 54MW coal power plant in Gboko, Benue State and is currently working towards installations at Ibeshe in Ogun state and Obajana in Kogi State. Edwin, who said that the group was currently importing coal from South Africa, revealed that it has started exploring coal opportunities in Nigeria, especially in Enugu State. It has also established a separate division for coal exploration.
Edwin noted that inadequate power supply due to Nigeria's low supply of gas has affected Dangote's cement production, while the cost aspect has also impacted on the economy and increased cost for consumers.
"In this country, the major issue is power," said Edwin. "Any economy will climb to double digits, once there is power at the right price. With affordable power people will produce products locally, will gravitate to the private sector, leading to the creation of a middle class and more employment in the country."
Nigeria set to end cement imports in 2017
18 August 2014Nigeria: With a national production capacity at over 28Mt/yr, which far outstrips national demand of 20Mt/yr, Nigeria looks set to effectively end cement imports by 2017, according to UniCem's managing director, Olivier Lenoir. This is coming on the back of on-going strong national production capacity expansion by virtually all of the major cement producers operating in the country. By 2016, Dangote Cement will have increased its production to 50Mt/yr, Lafarge 15Mt/yr and UniCem to 5Mt/yr.
Sephaku Cement posts US$1.37m loss in its first year
08 July 2014South Africa: Costs relating to Sephaku Holdings' new cement business Sephaku Cement dragged the group to a loss in the year that ended in March 2014, though management has said that indications are positive for its cement venture.
Sephaku Holdings has a 36% share of Sephaku Cement, which in January 2014 completed the construction of two plants in North West Province and Mpumalanga. Nigeria's Dangote Cement is the majority shareholder in Sephaku Cement. Sephaku Holdings reported a post-tax loss of US$260,300 in the period under review, largely due to a loss from Sephaku Cement of US$1.37m.
Sephaku Holdings' latest results include little revenue from the cement business, as one of the plants began producing only in January 2014 and the other is due to begin production in July 2014. The South African cement market is currently oversupplied and is likely to remain that way for some time, but Sephaku and another newcomer, Mamba Cement, are banking on healthy demand growth and cost-efficiency advantages from their modern plants. Mamba has a plant under construction near Northam in Limpopo.
Ghana likely to face cement shortage
07 July 2014Ghana: Cement prices may soar in the coming weeks as manufacturers are faced with challenges hindering supply flow. Dangote Cement has suspended its imports to Ghana because of the fast depreciating Ghana Cedi, while Diamond Cement is reported to be facing challenges in importing clinker to manufacture cement in Ghana.
Cameroon: Dangote Cement has announced that its US$150m cement plant in Douala, Cameroon will commence production in August 2014. The company management said that the 1.5Mt/yr capacity plant was almost ready and would commence initial production at 1Mt/yr before production is stepped up to maximum capacity.
Dangote's general manager, Abdulahi Baba, said that the cement plant would revolutionalise the cement industry in Cameroon and help to stimulate the economy. According to Baba, the plant is ready for test running and what remains to be completed is the construction of access roads to the plant.
The Cameroon plant is also set to import clinker from other regions. Baba disclosed plans to build a jetty by the plant, which would make raw material imports and product distribution more convenient. The jetty will be situated close to the Douala Sea Port.
Dangote Cement launches attack on ‘re-baggers’
16 June 2014Nigeria: In a bid to tackle 're-bagging,' which is one of the biggest threats in the cement industry in Nigeria, Dangote Cement has launched an all-out attack on perpetrators.
In the cement industry 're-bagging' refers to the emptying of the original cement bag and refilling with a different adulterated product or commodity. Another common method is to buy cement from shops, grind it, mix it with sand and then put the adulterated commodity into a bag belonging to a reputable cement manufacturer.
Often cement makers end up bearing the brunt of customer dissatisfaction, as they believe the product is from the original source. In the case of damage associated with the product, consumers often attribute it to the firm whose bag has been used for the product.
"There are different forms of what these people are doing," said Devakumar V G Edwin, Dangote's managing director and CEO. "We have an extensive team that is spearheaded by a former police commissioner exclusively on this." According to Edwin, his team is working hard to halt bag thefts by cement plant workers, which facilitate the re-bagging business.
"We have even heard people say that they sell Dangote Cement for US$5.52 – 6.13/bag," said Edwin. "What happens is that our customers often call us and inform us of the situation. Sometimes, they tell us that we are cheating them because of the price someone tells them elsewhere. Once we get the information, we launch into action."
The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.
In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.
Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.
Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.
Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.