However bad the multinational cement financial reports get as they tighten their operations remember that it could be worse. For example, they could face the challenges the East African Portland Cement Company (EAPCC) has confronted over the last year. Reuters broke the news this week that EAPCC had widened its loss to US$9.96m due to poor sales, a major plant breakdown and labour unrest. All of this occurred in a construction economy demanding ever more cement.
EAPCC has seemed surrounded by controversy over the last year starting with a conflict of interest issue raised over a change in clinker supply in December 2011. This then led to the removal of the company's directors by the Kenyan government, which in turn led to a strike. In the chaos a worker was shot and wounded. On top of that the report reveals that there was a 'major' breakdown in one of the plant's kilns. It's a wonder that EAPCC didn't make a greater loss in the 2011-2012 year.
Demand for cement in Kenya and in the other countries in the east African region is growing. Data from the Kenya National Bureau of Statistics in December 2011 showed that cement consumption in Kenya rose by 12% in the nine months to September 2011. As reported last week in GCW72, ARM Cement (formerly known as Athi River Mining Ltd) reported a net profit of US$9.71m for the first nine months of 2012. This marks a 328% growth in profit compared to the same period in 2011 when it made US$2.26m. Meanwhile this week it was announced that Ethiopia is about to open its second cement plant in the town of Dire Dawa. More plants are on the way. Over in Tanzania, the Tanzania Investment Centre (TIC) announced that the country's cement deficit surpassed 1Mt since 2011.
As has happened elsewhere in Africa, notably in Nigeria and South Africa, local producers are pushing hard to restrict foreign imports as they grow their own capacity. In September 2012 the East Africa Cement Producers Association (EACPA) made warnings on the issue. The chairman of EACPA at the time was none other than the managing director of the EAPCC. In addition potential investors should take note that Kenya will hold its next general election in March 2013. Over 1000 people died in the protests following the 2007 election as well as the displacement of over 500,000 people.
Given this growth in protectionism, international producers who want to expand are being forced to seek riskier territories. Pakistan's Lucky Cement, a major importer of cement to Africa, is doing exactly this. It announced this week that it is entering into joint ventures in plants in DR Congo and Iraq. However these projects perform, Lucky Cement must be praying that they don't end up looking like the last year that EAPCC has endured.
