Displaying items by tag: Kenya

Kenya: Mombasa Cement has completed construction of a 36MW wind farm consisting of 12 3MW turbines in Vipingo. Bahrain News Agency has reported that the plant will power Mombasa Cement’s 1.6Mt/yr integrated Vipingo cement plant, with surplus to be sold to the state-owned power provider Kenya Power. The power plant will supply electricity for the completion of Mombasa Cement’s planned US$73m upgrade to its grey cement clinker production process at the Vipingo plant.

Kenya: Mombasa Cement has started building a 36MW wind farm at its integrated Vipingo plant. The project is intended to support a new grinding unit being constructed at the site, according to the Business Daily newspaper. It is intended to reduce the cost of electricity and minimise disruptions caused by power cuts. The wind farm will consist of 12 turbines with a capacity of 3MW each. The cement plant is also installing a high-power voltage line from the Kaloleni substation to improve its connection to the local electricity grid.

Kenya: The new owners of Athi River Mining Cement entered the company’s 0.7Mt/yr integrated Kaloleni cement plant on 14 October 2019. The Standard has reported that Narendra Raval, chairman of Devki Group, which also owns National Cement, was held up for some time at the entrance, because security guards had not received orders to let him in. Raval spoke to employees, promising that all 1100 would keep their jobs following completion of the takeover, whereupon all salaries would be harmonised with those of their National Cement colleagues.

Tanzania/China: China’s 100Mt/yr-capacity Huaxin Cement has bought Maweni Limestone from the Kenyan-based Athi River Mining (ARM) Cement. Huaxin has stated that this first incursion into East Africa is ‘integral to its broader strategy’ of expansion in emerging markets. It adds the Tanzanian producer of Rhino cement to its burgeoning portfolio of overseas assets including cement plants in Tajikistan, Uzbekistan, Cambodia and Nepal.

Kenya: Chattan Vyas, general manager of a Rai Group-owned grinding plant in Kenya’s Rift Valley province, has been found dead in bed on the morning of 22 September 2019 under mysterious circumstances. The Standard has reported that the attending pathologist confirmed the cause of death as strangulation, noting also that Vyas had been bound.

Kenya: East Africa Portland Cement Company (EAPCC) dismissed its entire management staff except managing director Simon Peter Ole Nkeri with one month’s notice on 19 September 2019. Business Daily has reported that the company will seek to rehire a small proportion of the personnel with a 60% pay cut. The downsized management team will oversee the redundancy of its entire junior staff, some of whom will be taken back on with a view to reducing the total employees by 25% to 600 from 800.

EAPCC’s staff costs in the second half of 2018 were US$38.5m, 80% of its net revenue for the period. Its anticipated sales of land, if successful, are expected to exceed the US$52m needed to clear its outstanding debts. Shareholders in the company include LafargeHolcim (42%) and the Kenyan government (52%).

Pradeep Paunrana’s latest attempt to wrest back control of ARM Cement was dismissed this week in Kenya. Administrators PricewaterhouseCoopers rejected a US$12.5m guarantee to stop the sale to a rival, according to Business Daily newspaper. Paunrana, the former managing director and majority shareholder of ARM Cement, had teamed up with Rai Group to thwart a rival bid for his company from National Cement.

The guarantee was a 20% portion of a full bid of US$63m by Paunrana and Rai Group but the administrators rejected it on the grounds that it had a nine-month time limit. They were reportedly concerned that legal proceedings over ownership of the cement producer could last beyond this. A deal to sell ARM Cement to National Cement for US$50m was agreed in May 2019. However, Paunrana fought back and the courts are expected to deliberate over the issue for some time.

ARM Cement entered administration in August 2018 following a growing loss in 2017 and poor markets in Kenya and Tanzania. At the time the cement producer blamed its poor performance on elections in Kenya causing reduced cement demand, a coal import ban in Tanzania causing production issues at its Tanga cement plant and increased competition in both countries.

The implications of National Cement actually succeeding in its bid for ARM Cement would mean a realignment of the local industry. LafargeHolcim’s subsidiary Bamburi Cement leads the sector by production capacity and market share. It operates one integrated and one grinding plant. Mombassa Cement and then a variety of smaller companies, trail it.

The Devki Group-backed National Cement has steadily been expanding in recent years. In April 2018 it was announced that the International Finance Corporation (IFC) was going to invest US$96m in National Cement and that Devki Group chairman Narendra Raval was going to commit a similar sum towards a new integrated line in Kenya and two new grinding plants in Kenya and Tanzania. More recently it acquired the long-running Cemtech plant project in West Pokot, along with its mineral deposits and licences. If it were able to successfully buy ARM Cement it would become Kenya’s second largest cement producer by market share.

ARM Cement is not the only Kenyan cement producer facing these kinds of problems. The Kenyan government is the majority shareholder East Africa Portland Cement Company (EAPCC) and it has been working on a rescue package for it since early 2019. The local market had similarly negatively affected the EAPCC’s financial performance and it has been attempting to cut its debts. In its case, it has been trying to sell land to pay off its debts but it has faced disputes with local residents. It has also tried reducing its workforce, with varying degrees of success. Its integrated plant at Athi River near Nairobi was reported to be operating at a 50% capacity utilisation rate in late 2018.

Table 1: Cement production in Kenya, 2015 – 2019. Source: Kenya National Bureau of Statistics (KNBS).

Overall cement production in Kenya peaked at 6.7Mt in 2016 and has fallen since. It fell by 2.8% year-on-year to 2.9Mt in the first half of 2019 from 3Mt in the same period in 2018. Consumption fell by a similar amount to production in the first quarter of 2019. Analysts like Knight Frank have blamed this on a slowdown in the real estate market, although it holds up hope for government house building scheme to rescue the situation.

In this kind of market it is understandable that the cement market is rationalising. The World Bank has forecast gross domestic product (GDP) growth of 5.8% in 2019 and better in the years ahead. Whoever is left in the cement business once the corporate dust settles stands to benefit.

Kenya: PricewaterhouseCoopers has rejected Rai Group’s bank guarantee of US$12.5m as part of its US$62.6m bid for ownership of ARM Cement. The bid constituted an attempt to forestall the latter’s sale to Devki Group subsidiary National Cement, which remains under the scrutiny of the courts. Business Daily has reported that Rai Group’s offer failed due to an insufficient expiry period of nine months on the guarantee, exposing the seller to untenable risk.

Kenya: East Africa Portland Cement Company (EAPCC) has declared an intention to sell two parcels of idle land in Machakos County totalling an area of 2000 acres. Business Daily reports that the 40-day leniency period in which for the company to clear its debts expires on 11 September 2019. Shareholders will vote at an extraordinary general meeting (EGM) on 27 September 2019 on whether to sell the land. To sell the land, EAPCC must first evict 14,300 resident squatters.

Kenya: Rai Group must pay a guarantee of US$62.6m to forestall the sale of Athi River Mining (ARM) Cement. The Kenyan financial services company, owned by Jaswant Rai, is backing a claim by Pradeep Paunrana against PricewaterhouseCoopers over its administration of the sale of the publically-owned ARM Cement. Paunrana, erstwhile majority shareholder and managing director of ARM Cement, is contesting the cement company’s sale in May 2019 to Nairobi Cement, a subsidiary of Devki Group, for US$48.2m including a deposit of US$9.62m. Paunrana argues that the sale was unfair because ARM Cement was misvalued, having missed opportunities to sell its fertiliser and mineral production businesses due to pressures from potential buyers. Business Daily has reported that Paunrana previously submitted an unsuccessful bid in consortium with Rai Group to buy back the company for US$62.6m, also May 2019.