Displaying items by tag: Dangote Cement

South African cement producer PPC reported this week that its annual profits rose due to ‘strong’ performance in Rwanda and Zimbabwe. Unfortunately it had no such luck in the Democratic Republic of the Congo (DRC) where its new plant near Kimpese in Kongo Central province has suffered from political instability, lower cement demand and subdued selling prices.

As the group went on to describe the local market as ‘challenging’ with production capacity above market demand. Research from the International Finance Corporation (IFC) suggests that the country will only reach a cement supply deficit by 2022. On top of this the country’s elections have been delayed from December 2017 to December 2018, creating uncertainty in the construction market and delaying infrastructure projects. Following an impairment assessment PPC took an impairment cost of US$14m on the unit. Or in other words it concluded that the value it might gain from selling its new 1.2Mt/yr plant was less than the estimated US$280m it cost to build it.

This outcome is depressing given that the plant was only commissioned during the last quarter of 2017 and the fundamental need for development in the DRC. The unit is run by local subsidiary PPC Barnet DRC, a joint venture 69% owned by PPC, 21% owned by Barnet Group, with the remaining 10% owned by the IFC. The plant was 60% debt funded by the IFC and Eastern and Southern African Trade and Development Bank. In January 2018 PPC agreed with its lenders to reschedule debts from the project until 2020. Then in April 2018 it was reported that PPC was in talks with China National Materials (Sinoma) over selling its stake in the plant. PPC chief executive officer (CEO) Johann Claassen said that the deal was dependent on the price and the on going merger between Sinoma and China National Building Material (CNBM).

With the merger between the Chinese cement giants close but yet to be confirmed, PPC remains stuck with a cement plant it’s losing money on. No doubt also the Chinese producers will aim for a bargain on the unit, especially since Sinoma built the plant. This also raises one potential method how the merged Sinoma-CNBM might expand internationally by scooping up plants it builds that have subsequently gotten into financial trouble.

All in all it’s a cautionary tale about how fast cement companies are able to expand in Sub-Saharan Africa. The demographics are enticing to investors but if the market isn’t there or if competitors get there first then building cement plants can go wrong. A 1.8Mt/yr joint-venture plant run by Lucky Cement started up in late 2016 also in the Kongo Central province. On top of this neighbouring countries have targeted DRC for exports. A local ban on imports of cement was implemented in mid-2017 and reportedly renewed in the west of the country for another six months in February 2018. However, Nigeria's Dangote Cement said in its first quarter results for 2018 that its operations in the Republic of Congo were targeting exports at the DRC. As PPC has discovered, investing in Sub-Saharan African has its risks.

Cameroon: The Ministry of Finance forecasts that demand for cement will rise by 10% due to various infrastructure projects. The government department also indicated that some cement producers are increasing their production capacity, according to Business in Cameroon.

Cimencam, a subsidiary of LafargeHolcim, is planning to build a 0.5Mt/yr grinding plant at Nomayos in Yaoundé. It is expected to be complete in 2019. Dangote Cement plans to build a 1.5Mt/yr plant in Yaoundé and Ciments de l'Afrique (CIMAF) is upgrading its plant Douala to 1.5Mt/yr from 0.5Mt/yr. The CIMAF project is scheduled for completion also in 2019. Following commissioning of all the new projects, the market share of each cement producer is expected to be Dangote Cement with 45%, Cimencam with 30%, CIMAF with 22% and Medcem with 3%.

Ethiopia: Deep Kamara, the country manager of Dangote Cement Ethiopia, has been shot dead in an attack by unknown assailants. A driver and a secretary were also killed in the incident, according to the Addis Standard newspaper. The attack took place at Inchini, near to the cement producer’s Mugher plant.

A local government source that spoke to the newspaper said that Kamara had recently visited the plant as part of discussions between the company and local residents. Oromio state suffered riots in 2016 and 2017 with damage incurred to Dangote Cement’s plant on several occasions.

Nigeria: Joe Makoju, the Group Chief Executive Officer of Dangote Cement, has revealed that the cement producer exports 0.21Mt of cement to Ghana, Togo and Niger in the first quarter of 2018. The company’s revenue grew by 16% year-on-year to US$668m from US$575m, according to the Vanguard newspaper. Its profit increased by 29% to US$199m from US$154m. Cement sales rose by 2.8% to 6.2Mt from 6.03Mt.

Nigeria: Germany’s Gebr. Pfeiffer has struck a deal to sell a MVR 6000 R-4 mill for raw material grinding and a MPS 3350 BK mill for processing coal for kiln firing for Dangote Cement’s new plant at Okpella in Edo State. The mill order is the first for Gebr. Pfeiffer from the Nigerian cement producer. The order was placed by the China’s Sinoma International Engineering.

The MVR mill featuring a total drive power of 4000kW will be grinding 550t/hr of cement raw material to a fineness of 10% R 90µm. The MPS 3350 BK with a drive power of 1100kW is designed for a throughput rate of 50 - 70t/hr and will grind Nigerian coal, imported coal and/or pet coke, to a fineness of 12% R 90µm. Gebr. Pfeiffer’s own staff will supervise erection and commissioning.

Nigeria: Dangote Cement has appointed former Xstrata CEO Mick Davis as a non-executive director alongside Cherie Blair, a lawyer and the wife of ex-UK Prime Minister Tony Blair. The new board appointments are targeted at strengthening the company’s board, according to Bloomberg. While the company did not explain the reason for such high-level appointments, it has been reported that the company is planning to relaunch its bid to be listed on the London Stock Exchange (LSE). According to Bloomberg, Dangote has already approached investment bankers to discuss a potential UK listing.

Davis ran Xstrata, the mining giant now owned by Glencore, for 12 years to 2013. He is now the chairman of Macsteel and the CEO of the UK’s ruling Conservative party. Cherie Blair’s other board positions include Renault SA.

Nigeria: Dangote Cement will use two vertical roller mills (VRM) from Germany’s Loesche for a new production line at its Obajana plant in Kogi State. The order comprises a six-roller mill for raw cement meal with a capacity of 580t/hr, the largest roller mill for raw material in the Loesche range, and a three-roller mill with a modular design featuring a drive power range of 1000kW for grinding hard coal and lignite with a throughput of up to 70t/hr.

The scope of delivery also includes a LDC classifier for the raw cement mill and a LSKS ZD classifier for the coal mill, which is characterised by individually adjustable grain size separation. The raw material mill is equipped with metal-matrix-compound (MMX) technology. The two mill gear units are equipped with state monitoring and remote access for remote monitoring. Loesche is also contributing to the design and planning of the entire plant as well as the engineering for the electrical measurement, control and regulation technology and complete automation. The delivery date is scheduled for the third quarter of 2018.

The contract partner for this project is China’s Sinoma International Engineering, which has previously installed a seven clinker and cement raw meal VRMs for the Obajana plant. The site has a cement production capacity of over 12Mt/yr and it is the largest cement plant in Sub-Saharan Africa.

Tanzania: Dangote Cement plans to start using natural gas at its Mtwara plant by the end of May 2018. The decision follows the completion of a new gas pipeline near the plant, according to the Citizen newspaper. The plant has been using temporary diesel generators. A source quoted by the newspaper said that the unit has been using 6Ml/month of diesel at a cost of about US$4.4m. In late 2016 Dangote Cement made a deal with the government to supply natural gas to its cement plant at Mtwara following a temporary shutdown at the site.

South Africa: Dangote Cement South Africa’s sales revenue rose by 3.7% year-on-year to US$200m in 2017 from US$192m in 2016. The subsidiary of Nigeria’s Dangote Cement attributed the result to increased demand and improvements in operational efficiency in the second half of the year. Its net profit fell by 16.2% to US$4.87m from US$5.81m due to one-off income from the closure agreement with Sinoma on the final handover of a new cement plant.

The cement producer added that the local cement industry increased its prices and ‘customer mix stability’ in 2017. Total estimated sales volumes including imports fell by 0.8% to 12.9Mt from 13Mt.

Nigeria: Dangote Cement’s sales revenue rose in 2017 but its sales volumes of cement fell. Its revenue rose by 31% year-on-year to US$2.23bn in 2017 from US$1.70bn in 2016. However, sales volumes of cement in Nigeria fell by 15.9% to 12.7Mt from 15.1Mt. Altogether, its sales volumes rose by 8.4% to 9.37Mt in the rest of Africa and fell by 7% to 21.9Mt in total. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 50.9% to US$1.08bn from US$713m.

“Although Nigerian volumes were lower in 2017, our Pan-African operations increased volumes by 8.4% and now make up 42% of the Group’s total cement sales, demonstrating the robust diversification of our business,” said Joe Makoju, Acting Group Chief Executive Officer of Dangote Cement. He added that the cement producer had increased its footprint from eight countries to 10 during the reporting period with the opening of new facilities in the Republic of Congo and Sierra Leone, while its operations in Cameroon, Senegal and Ethiopia achieved ‘strong’ sales growth during the year.

Regionally, Dangote Cement said that its estimate for the total Nigerian cement market fell by 18% to 18.6Mt in 2017 due to a recession in the first half of the year and higher prices. It also noted that its Gboko plant in Benue State was mothballed for ‘most of the year.’ Elsewhere, it said that it exported 174,000t of cement from Nigeria to Ghana. In Senegal it introduced 32.5R cement to its product range. In Sierra Leone it opened a 0.5Mt/yr terminal and bagging plant in Freetown in early 2017. In Tanzania it said that its plant at Mtwara had lost earnings due to its reliance on temporary diesel generators. Gas turbines are scheduled to start operation in March 2018.