Displaying items by tag: Dangote Cement
Dangote Cement to start coal mining coal towards end of 2016
09 August 2016Nigeria: Dangote Cement intends to start mining its own coal at Ankpa, Kogi State in order to cope with gas shortages in the country. The coal will be of a high enough quality to be used without blending. Most of the cement producer’s production lines in Nigeria will have operational coal mills by September 2016. At present the company is using locally purchased coal that is blended with imported coal to ‘assure optimal quality.’
“Our investment in coal is enabling us to reduce our dependence on both oil and gas as fuel sources, thus protecting our production from disruption and improving margins,” said chief executive Onne van der Weijde.
Dangote Cement slows its pace of expansion
03 August 2016Shock news this week: Dangote Cement has decided to slow its expansion in Africa. The announcement from CEO Onne van der Weijde topped a half-year financial report that trumpeted high revenues and sales volumes of cement but one that also had to explain why earnings before interest, taxes, depreciation, and amortisation (EBITDA) had fallen by 10% year-on-year. The decline was blamed on lower cement prices and higher fuel costs, as well as the costs of setting up new cement plants.
The mixed bag of results can be demonstrated by a 38.8% leap in cement sales volumes in Nigeria to 8.77Mt for the half year. Dangote attributed this in part to price cut in September 2015. This then netted an increase in revenue of 4.2% to US$677m but its EBITDA in Nigeria fell at a faster rate than the group total.
As an indication of some the pressures facing Dangote at home, it reported that its fuels costs rose by 32.3% to US$14.4/t in the reporting period. The backdrop to this has been the general poor state of the Nigerian economy. The International Monetary Forum (IMF) forecast that its gross domestic product (GDP) will fall by 1.8% in 2016 in its World Economic Outlook Update published in mid-July. Given that over three-quarters of Dangote Cement’s sales revenue came from Nigeria in 2015 this might explain the decision to slow its expansion plans down.
Outside of Nigeria, Dangote did extremely well in its West & Central Africa region, pushing up sales volumes, revenue and EBITDA by triple figure percentages helped by commissioning of a new plant in Ethiopia. Exports were also highlighted as a key part of this region’s strategy to neighbouring countries. It also stated that its recent procurement of about 1000 trucks in Ghana would ensure that an increased share of that country’s imported cement would come from Dangote’s Ibese plant in Nigeria. South & East Africa was a different story, however with sales volumes and revenues rising as new cement plants bedded in but the region was dogged by currency devaluations and poor economies.
Dangote Cement’s response to its current situation is to protect its margins through cost cutting, by adjusting its prices and by slowing its expansion strategy to a five-year programme. However, it isn’t alone in its struggles to preserve profit in its Nigerian business. LafargeHolcim also reported a ‘challenging’ market in its first quarter results for 2016. Its cement sales volumes fell in that quarter due to what it said were energy shortages and logistics-related issues. Its mid-year financial report, out on 5 August 2016, will make interesting reading to see if its experience in Nigeria matches Dangote’s.
Elsewhere, it appears that both PPC and LafargeHolcim have also been struggling in South Africa. PPC’s revenue from cement sales within the country fell by 5% year-on-year to US$171m its half-year to the end of March 2016. It blamed the drop on increased competition. LafargeHolcim noted similar problems in South Africa without going into too much detail in its first quarter.
With the Nigeria Naira-US Dollar exchange rate devalued by over 50% since the start of 2016 and the Nigerian economy bracing itself for a recession, it seems unlikely that Dangote Cement could do anything else than slow down its expansion plans given how much of its revenue comes from within Nigeria. As we also report this week, PPC is in a similar bind. Its CEO had to reassure shareholders that the group’s new plant in Zimbabwe would be finished on schedule later in the year. Controlling imports and exports of cement in Africa has suddenly become more important than ever.
Both companies need to expand internationally to protect themselves from regional economic downturns but the current situation in each of their home territories is preventing this. In the meantime their own export markets are set to become more important than ever. Any target markets that declare themselves ‘self-sufficient’ in cement will be a big impediment to this.
Dangote to slow growth strategy as Naira devalues
29 July 2016Nigeria: Dangote Cement says that it will slow down its growth strategy in response to ‘challenging’ markets in Nigeria and the rest of Africa. Chief executive Onne van der Weijde made the comment in the Nigerian cement producer’s financial results for the first half of 2016. The group now intends to focus on a five-year building programme to better balance funding and investment.
Dangote Cement’s total revenue rose by 20.6% year-on-year to US$926m from US$768m in the same period of 2015. However, its earnings before interest, taxes, depreciation, and amortisation (EBITDA), a measure of operating profitability, fell by 10.2% to US$420m from US$468m.
“We have achieved a commendable result, given the very challenging situation in our main market and general economic weakening across Africa,” said Onne van der Weijde. “The devaluation of the Naira will obviously have an impact on costs and our priority will be to protect margins.” He added that the group was ‘optimistic’ that Nigerian infrastructure investment would soon increase demand for cement.
Dangote saw its sales volumes of cement rise by 59.5% to 13Mt from 8.1Mt. The bulk of sales, 8.77Mt, were in Nigeria, with fast increases in South and East Africa as operations in Tanzania started.
Nigeria: Sinoma International, a subsidiary of Sinoma, has signed two engineering, procurement and construction deals with Dangote Cement worth a total of US$370m. The first, project worth US$281m, is to build a 6000t/day clinker production line for Okpella Cement, a subsidiary of Dangote based in Edo state. The scope of the contract covers limestone crushing to packaging cement for shipping. The project is expected to take 27 months to produce cement and 30 months to complete.
The second project, worth US$89m, is to build a slag grinding plant at Port Harcourt. The scope of the contract covers unloading slag and gypsum to packaging cement for shipping. The project is expected to take 20 months to complete.
Kidnapped Indian cement workers released in Nigeria
18 July 2016Nigeria: Two Indian nationals working for Dangote Cement who were kidnapped at the end of June 2016 have been released. The workers were abducted from Boko, near Makurdi in Benue state while they were travelling to work. The External Affairs Ministry said in a statement that they believed that local criminals were involved and that there was no interaction with the terrorist group Boko Harem.
Dangote Cement builds distribution presence in Ghana
15 July 2016Ghana: Dangote Cement plans to recruit 5000 workers following its procurement of 1000 trucks to distribute its products. The cement producer has started recruiting drivers, truck driver assistants and loaders. The vehicles arrived in Ghana in early July 2016, according to the Lagos Guardian. The drive to build its distribution network complements the company’s on-going efforts to build a 1.5Mt/yr clinker grinding plant in Takoradi.
Indian cement workers kidnapped in Nigeria
01 July 2016Nigeria: Two Indian cement workers for Dangote Cement have been reportedly kidnapped in Gboko, Benue State. Civil engineer Sai Srinivas and his colleague Anish Sharma were abducted while travelling in a convoy of cars to the local Dangote cement plant on 29 June 2016, according to The Hindu newspaper. Srinivas has worked for Dangote Cement for three years. Previously he worked for Aditya Birla group in Raipur, India.
Nepal: Cement producers in Nepal are upgrading their plants in preparation for the start of operation by a number of foreign owned cement companies. Dhruba Thapa, the president of the Cement Manufacturers' Association of Nepal (CMAN), said that the imminent ‘invasion’ by foreign cement producers has led to unease amongst local producers, in comments to the Kathmandu Post
Dangote Cement from Nigeria, Hongshi and Huaxin from China and Reliance Cement from India have all been granted clearance to start operations in Nepal. Their combined foreign direct investment amounts to US$1.45bn and their proposed output stands at 22,000t/day.
Local projects include Cosmos Cement’s plan to build its first clinker plant. It is expected to start production in the second half of 2016. At present the cement producer operates two cement grinding plants with a combined capacity of 800t/day. It is also upgrading the capacity of these plants to a total of 2000t/day.
Arghakhanchi Cement has announced that it will nearly triple its capacity to 3000t/day by the end of 2017. At present the plant has a production capacity of 1200t/day. Agni Cement Industry has planned to set up a new plant with a daily capacity of 1200t/day. Currently, its capacity is 300t/day.
Domestic demand for cement is 5.5Mt/yr and production is 4.6Mt/yr according to CMAN. Domestic cement manufacturers claim that they have become able to meet 80% of the country's requirement with a capacity utilisation of 50 – 60%. However, foreign investors have said that there is unexplored potential demand for cement in Nepal as infrastructure development grows. Local producers have countered this claim, saying that foreign direct investment has been promoted by offering foreign investors more tax incentives than what domestic producers receive.
Ghana: Dangote Cement has appealed to the Ghanaian government to ban imports of cement from China. Dangote officials made the comments on a press tour of its own cement import terminal at Tema, according to Kaspa local radio. Chinese cement importers were accused of not paying correct tariffs and not holding adequate certification.
Dangote, a cement producer based in Nigeria, faced investigations by the Ghanaian Ministry of Trade and Industry in February 2016 due to allegations of predatory pricing reported by local media. As well as operating a 1Mt/yr cement import terminal the company is building a 1.5Mt/yr clinker grinding plant in Takoradi.
Nigeria: Dangote Cement has started building a 6Mt/yr cement plant in Okpella, Edo. The Nigerian cement producer has invested US$1bn in the plant, according to All Africa. The company is also building another 6Mt/yr cement plant in Itori, Ogun. Its cement production capacity in Nigeria is expected to grow to 41Mt/yr once construction of both plants is complete. The groundbreaking event was part of the celebrations to mark company owner Aliko Dangote’s 59th birthday.