Displaying items by tag: GCW241
Crunching the numbers at Dangote Cement
09 March 2016Dangote Cement released its financial results for 2015 this week and certain numbers are more interesting than others. The headline that the company would probably like us to look at is a 14% rise in profit from significantly higher revenues. However, we would like to look at Dangote’s capacity and production figures. We have spoken about Dangote’s ambitions in this column in recent years and it is very likely that the topic will come up again in the future. But Dangote’s ambitions are increasingly becoming a reality for markets all around Africa. How are its pan-African expansion plans turning out?
Dangote Cement reported that cement production volumes were up by 35% in 2015 compared to 2014. This was due almost entirely to Dangote’s new plants outside of its native Nigeria. While its Nigerian cement production volumes rose from 12.9Mt in 2014 to 13.3Mt in 2015, production elsewhere came in at 5.6Mt, more than five times the amount that Dangote produced outside of Nigeria in 2014. This rapid rise was the result of the first cement being produced at its plants in South Africa, Senegal, Cameroon, Ethiopia and Zambia.
As Dangote has expanded into these new markets, we have heard much about the effects of its new capacity from other producers. In South Africa, long-established players have had to deal with falling cement prices due to the inauguration of Dangote’s Sephaku Cement subsidiary. In Zambia, Zambezi Cement was forced to lay off workers in 2015, citing the opening of Dangote’s new facility as a significant contributing factor. More recently, in February 2016, Ghana announced an investigation into Dangote’s operations in the country following accusations of ‘predatory pricing’ by its competitor Diamond Cement. The investigation is ongoing.
However, the complaints heard to date could really start to ramp up over the course of 2016 as Dangote starts to realise its full potential across Africa. Its cement production volumes may have risen by 35% in 2015 relative to 2014 but its capacity rose by an incredible 87%, with Dangote now claiming a capacity of 44Mt/yr! The capacity utilisation rate is just 43% and the inference is that the ex-Nigerian plants have not yet realised anything like their full potential. Local producers the length and breadth of Africa may well be looking at this situation with dread.
And ramping up its production in 2016 is by no means the end of Dangote’s pan-African vision, with new plants under construction in Nepal, Kenya and Zimbabwe. As well as new plants outside of Nigeria, Dangote cement capacity within Nigeria is also set to rise. It recently announced a further 9Mt/yr of capacity at two new plants. With exports to its smaller neighbours already causing consternation, this will surely add fuel to the fire for local producers like Diamond Cement.
So far in 2016, the news continues to be promising for Dangote. January 2016 sales volumes rose by 77.6% to 2.0Mt, with Nigerian sales up by 46.4% to 1.4Mt. February 2016 sales volumes were 38% better than a year earlier, with Nigerian sales up by more than 60% year-on-year to more than 1.5Mt.
At the end of its report, Dangote says that it expects to have around 77Mt/yr of cement capacity by the end of 2019. If realised, this capacity would be enough to put it up to sixth on the Global Cement Top 100 list by 2016 standards. It would have around 28% of Africa’s entire cement capacity, according to the Global Cement Directory 2016 and would be only 10Mt/yr behind the 87Mt/yr of cement capacity currently held by the established multinational player Cemex. That is truly a number to pay attention to!
Ravi Kirpalani to become CEO of ThyssenKrupp India
09 March 2016India: Ravi Kirpalani will join ThyssenKrupp India on the 14 March 2016 and take charge as the CEO of the Regional Headquarters of ThyssenKrupp India effective from 1 July 2016.
Indian-born, Kirpalani's last role was the Managing Director of Castrol India. Prior to joining ThyssenKrupp, he spent over 16 years at BP where he held a number of roles in India and in the UK. He will provide on-going support for the strategic development of all ThyssenKrupp’s business in India. He succeeds Michael Thiemann, who has been responsible for the region since 1 May 2013 and previously held various management functions at ThyssenKrupp Uhde GmbH over a period of more than 35 years, including member of the Management Board and CEO.
India is currently the third most important market in Asia for ThyssenKrupp. In the 2014 - 15 financial year the group generated sales of around Euro560m in the country and employed almost 6000 people at local companies.
Ireland: CRH has taken the Competition and Consumer Protection Commission (CCPC) to the Irish High Court over the seizure of the emails of one of its executives during a competition investigation in 2014. The CCPC was not entitled to ‘essentially run riot’ whilst searching the premises of Irish Cement, a subsidiary of CRH, at Platin, County Meath said CRH’s legal representatives, according to the Irish Times.
Irish Cement has accused the CCPC of seizing and retaining the emails of Seamus Lynch relating to his role with CRH. The CCPC was investigating Irish Cement at this time. Lynch left Irish Cement in June 2011 to join CRH and, when the search was carried was the managing director of CRH Europe (Ireland and Spain). In its challenge, CRH is claiming that the CCPC was not entitled to seize and retain any electronic files relating to a crh.com email account assigned to Lynch because this was not related to the business and activity of Irish Cement.
The CCPC denies all claims. It previously agreed not to use the material pending the outcome of the case.
Lafarge Zambia revenue falls by 6% to US$250,000 in 2015
09 March 2016Zambia: Lafarge Zambia’s revenue has fallen by 6% year-on-year to US$250m in 2015 from US$267m in 2014. Its profit fell by 24% to US$62m from US$82m. The subsidiary of LafareHolcim blamed the results on challenging markets, power costs increase and steep currency depreciation.
“Despite new competition and challenging markets, Lafarge Zambia maintained its market leadership in 2015 both in Zambia and in the Democratic Republic of the Congo, with a marginal reduction versus our record 2014 volume numbers. The second half of 2015 saw a combination of negative factors both in terms of market and in terms of production costs,” said Lafarge Zambia CEO Emmanuel Rigaux.
In 2016 the cement producer expects the market to be challenging for both price and volume. It intends to focus on exports markets in the Democratic Republic of the Congo, Malawi, Zimbabwe and Tanzania. A partnership with the rail authorities including Zambia Railways Limited is also expected to further aid exports.
India: Dalmia Bharat has received approval from the Competition Commission of India (CCI) to acquire a 15% stake in its subsidiary Dalmia Cement Bharat from private equity firm KKR for over US$181m in a cash and stock deal. After the purchase, Dalmia Cement Bharat will become a wholly-owned subsidiary of Dalmia Bharat.
Dalmia Bharat provides management services to the group companies belonging to the Dalmia Bharat group, owns intellectual property such as trade names for its group companies and holds shares in the group companies, either on its own or through its subsidiaries. Dalmia Cement Bharat produces cement and it also makes refractories.
Jaiprakash Associates misses interest payment on bonds
09 March 2016India: Jaiprakash Associates has missed an interest payment due on 7 March 2016 on its bonds worth US$150m. The interest will be paid later from the proceeds of its recent US$2.4bn sale of cement assets, the company said in a statement.
"Interest was payable on the bonds on the semi-annual interest payment date of 7 March 2016. The issuer wishes to inform you that it has not paid such interest. The issuer intends to engage in discussions with holders of the bonds," the statement said. The convertible bonds are due for redemption in 2017.
Jaiprakash Associates announced in late February 2016 that it was selling the majority of its 22.4Mt/yr cement portfolio to UltraTech Cement for US$2.4bn.The group has an estimated debt of US$11bn as of 31 March 2015, according to a Credit Suisse House of Debt report dated 21 October 2015.
Italy: Cementir Italia has had its Euro125m offer to purchase Sacci SpA approved by the Italian Antitrust Authority, the company has said in a statement. The competition body gave its approval to Cementir Italia’s owner, Cementir Holding.
Cementir Italia submitted its offer for the business in November 2015. The target assets comprise five cement production plants in central and northern Italy, three terminals, several ready-mixed concrete facilities, most of which in central Italy, a transport service and some equity interests in other companies.
Cementir Italia will pay part of the acquisition price upon closing of the transaction and the remainder within 24 months from completion, Cementir said in a previous statement. The first part of the payment is subject to adjustment, it added. Cementir plans to finance the acquisition with new and existing debt.
Orascom Construction to build cement plant in Algeria
09 March 2016Algeria: Orascom Construction has signed a contract to build a 6000t/day greenfield cement plant in Algeria for an unnamed private sector client. The deal is part of a wider set of industrial and infrastructure projects worth US$200m the engineering and construction contractor has announced including infrastructure work for an industrial complex in Algeria and an order to manufacture and supply all structural steel for the West Nile Delta gas development project.
“These new construction contracts build on our substantial track record in Algeria that stretches across a number of sectors including power, water desalination, petrochemicals and cement. We are also pleased to receive a large order to fabricate and supply the steel structure for an important gas development in Egypt, and look forward to further participating in this sector through our construction group and National Steel Fabrication,” said Osama Bishai, CEO of Orascom Construction.
Cemex obtains consent to amend its credit agreement
08 March 2016Mexico: Cemex has obtained consent to amend its credit agreement dated 29 September 2014 in order to delay the scheduled tightening in its consolidated financial leverage and coverage ratio limits by one year. The formalisation of the amendment is subject to customary conditions and is expected to be finalised in the following days.
The amendment to the credit agreement will allow the leverage ratio covenant to remain at 6.0 times until and including 31 March 2017. It will then gradually decline to 4.0 times by 30 June 2020. The margin grid in the credit agreement will be modified such that if the consolidated leverage ratio is greater than 5.50 times in the reference periods ending on 31 December 2016, 31 March 2017, 30 June 2017 and 30 September 2017. The applicable margin will be 425 bps instead of 400 bps. All other levels in the margin grid remain unchanged.
In addition, the credit agreement will be amended to allow Cemex the right, subject to meeting local requirements in the Philippines, to sell a minority stake in a subsidiary that directly and indirectly mainly owns Cemex’s cement manufacturing assets in the Philippines.
Suez Cement denies it plans to exist Egyptian market
08 March 2016Egypt: Suez Cement has denied that it is planning to leave the Egyptian market. The announcement comes in response to media speculation following the cement producer’s admission that it has been unable to repatriate profits of Euro50m from the country for about a year. Suez Cement is 55% owned by Italian cement producer Italcementi.
Suez Cement’s Managing Director Bruno Carre blamed the problem on a foreign currency crisis in Egypt. The country’s central bank has introduced measures to reduce non-essential imports to save hard currency. Subsequently, businesses are unable to access US Dollars for imports and goods are piling up at ports.