Displaying items by tag: Nigeria

Nigeria: Former Lafarge Zimbabwe chairman Johnathan Shonhiwa has joined Dangote Group. Shonhiwa, who resigned from Lafarge Zimbabwe recently, was chairman for almost two years after having taken over from Muchadeyi Masunda in January 2014. Prior to that, he was managing director of Lafarge Zimbabwe for six years, finance director for four and a half years and finance manager for two years.

The small cement industry of Mozambique, in south west Africa must be an interesting place to make cement. On one side the country's producers, like their more vocal South African counterparts, have been fighting off cheap imports from Iran, Pakistan, China et al. On the other side of the coin though, Mozambique has growing domestic demand and is within striking distance of growing markets further into Africa, like Malawi and the Democratic Republic of Congo (DRC).

With the announcement this week that there will be not one but two new integrated cement plants in the country, bringing over 2Mt/yr of new capacity, everything should be set fair for the coming years then, shouldn't it? Domestic production will rise, the price of local cement will fall as a result, competition from imports will drop off and money will be made from new exports.

Except that might not happen. Before the announcement of these two plants, (one of which does not state a capacity), there was around 5.5Mt/yr of grinding and integrated capacity either currently active in Mozambique or due to come onstream in 2015. With the new projects this rises to over 7.5Mt/yr.

The desirable chain of events described above starts to break down due to the fact that domestic demand in Mozambique, while rising, is not currently anywhere near as high as domestic supply. The United States Geological Survey estimated that the country produced just 1.2Mt/yr in 2012. Data for 2013 and 2014, though unavailable, is highly unlikely to show a three-fold increase. Indeed Insitec, a minority shareholder in Cimentos de Moçambique, predicted in 2014 that demand for that year would rise to just 1.5Mt, before hitting the dizzying heights of 1.8Mt in 2018 – And that's still three years away!

So what are the options? Option 1: Some or all of the planned and mooted cement plants will fail to come to fruition. Option 2: Some or all of the plants will be built but will operate at reduced capacity and/or on a campaign basis. Option 3: The Mozambican cement industry becomes a regional powerhouse and starts to export to its neighbours.

Option 1 is certainly possible. Limak Group, one of the parties linked to the new projects, is a Turkish cement producer that is inexperienced outside of Turkey. There has also been a lack of information on the progress of projects by Austral Cimentos ('coming on stream in 2015'), Star Cement and Consolidated Building Materials, although a lack of progress reports does not necessarily imply 'no progress.'

Option 2 is more likely, as some producers already operate on a campaign basis. InterCement's plant at Nacala, formerly an integrated plant, currently operates only as a grinding station. Option 3 is also possible, with Malawi particularly lacking in cement production facilities.
In reality a combination of all three 'Options' is the most likely outcome. However, this will lead to Mozambique becoming yet another player in an increasingly busy African cement market. The desire for self-sufficiency in cement production, a common goal for the region's governments, can easily lead to over-estimates of local demand growth, with resultant over-capacity. Of course the expectation that all African countries can get rid of this extra cement capacity via exports will ultimately backfire.

In southern Africa we already have South Africa exporting. Angola declared 'cement self-sufficiency' in October 2014 and banned imports at the start of 2015. Zambia, Botswana, Zimbabwe and DRC all have large-scale Dangote and/or PCC projects near completion or in production that will greatly reduce their need for imports. Meanwhile, further north, Nigeria is already a gigantic producer and significant cement exporter. Cameroon has recently banned imports and Ghana is thinking of doing the same. Over in the east of Africa, Ethiopia's (and the rest of that region's) rapidly-developing situation was covered in this column just two weeks ago.

Finally, in the north of Africa, Algeria has declared its intention to be self-sufficient in cement by 2016. This news must have 'gone down like a lead balloon' in Italy, Spain and Greece, which have been reliant on north African markets after the bottoms fell out of their own economies. In the north east, Egypt has different problems at present, also described previously. It needs fuel not cement!

So where does this all lead for regional cement dynamics in Africa? Well perhaps the situation in India points the way. There, as in Africa, local and regional producers with the desire to expand grew from their local bases and eventually overlapped. Against a backdrop of lower-than-expected demand, the country now has overcapacity. This has resulted in smaller producers being acquired and leaving the market.

Could this eventually happen in Africa? Only time will tell. However one thing is certain: It's just not possible for every country to export to every other country!

Nigeria: Dangote Cement has appointed Douraid Zaghouani as a non-executive director with effect from 29 April 2015. Zaghouani holds a degree in Civil Engineering from École Nationale des Travaux Publics de l'État in France and is also a graduate in Business Administration from the École Supérieure des Sciences Commerciales business school in Paris.

Zaghouani is presently the Chief Operating Officer of the Investment Corporation of Dubai (ICD). In this role, he supports the CEO's Office in corporate strategy development and is responsible for the efficient operational management of the organization.

Nigeria: Seven directors have resigned their appointments from the Board of Ashaka Cement with effect from 10 March 2015. Umaru Kwairanga (chairman), John William Stull (vice chairman), Sen. Muhammed A. Muhammed, Kolawole Babalola Jamodu, Abubakar Ali Gombe, Lamido Abba Tukur and Hamra Imam have all resigned.

The board has appointed Mallam Suleiman Yahyah as the new board chairman with effect from 12 March 2015. They also appointed three as non-executive directors, Anders Kristiansson, Edith Onwuchekwa and Rabiu Abdullahi Umar, with effect from 12 March 2015.

Nigeria: Dangote Cement has appointed Onne van der Weijde as CEO, effective from 1 February 2015. Van der Weijde, ex-Holcim India head, will take the helm from Dangote Cement's Devakumar Edwin.

Nigeria: Lafarge Africa has notified the Nigerian Stock Exchange of the appointment of Adepeju Adebajo and Anders Kristiansson to the board of Lafarge Africa. Both staff members were formally appointed on 27 October 2014.

Adebajo is currently the MD of WAPCO operations. Prior to this, she served as the Chief Executive Officer and Managing Director at Mouka Limited. She was already the CEO of UTC Nigeria Plc, where she successfully turned the business around.

She previously headed strategic planning, brand management and product development at the United Bank for Africa and has had management consulting experience at Boston Consulting Group in the UK and financial analysis experience at Citibank in the UK.

Peju holds a Bachelor of Engineering (Chemical Engineering) from the Imperial College of Science & Technology, London; a Master of Engineering (Chemical Engineering) from the University of London; and a Master of Business Administration, Harvard University, Boston.

Anders Kristiansson is a Swedish citizen who started his career with Procter & Gamble (P&G) in Scandinavia and thereafter worked for P&G in South Africa. He has been a Global Divisional Controller for Eaton Automotive working in Europe and North America, whereafter he returned to Africa to oversee Celtel's finance departments across its African operations as Director of Financial Operations.

He moved to Nigeria in 2008 as Group CFO for PZ Cussons Nigeria, managing Finance and IT for PZ's five Nigerian companies. Prior to joining Lafarge, he was the CFO for NBC/Coca-Cola HBC's operations in Nigeria.

He holds a Master of Science Degree in Business Administration and Economics from the Gothenburg University, Sweden.

It won't surprise anyone to know that cement sales have fallen in the west African countries that are suffering from the on-going Ebola outbreak. However the scale may yet be instructive for this and other crises that may affect the cement industry in the future. The local data that follows mostly comes from a report by the World Bank published in early October 2014 looking at short and medium term economic impacts, as well as Global Cement research conducted towards the Global Cement Directory 2015.

All three of the principal countries involved – Liberia, Sierra Leone and Guinea – have low gross domestic products (GDP). They do not have cement kilns but they do have grinding plants and cement import infrastructure run by both local and international firms. They also lack readily accessible limestone deposits. In the short term (in 2014) a health crisis is expected to hit manufacturing through transportation and market disruptions stemming from both direct health implications and behavioural responses.

Liberia's cement sales fell by 60% in the third quarter of 2014, a drop the World Bank attributed to causes other than the rainy season. Quarterly cement sales more than tripled in 2013 from around 10,000t to over 25,000t marking the commissioning of a new mill at the Liberia Cement Corporation (HeidelbergCement) grinding plant. Dangote also has an import terminal in the country and is building its own grinding plant. The drop in cement sales since June 2014 has nearly undone all this production growth.

Neighbouring Sierra Leone has seen a steady fall in weekly cement sales since June 2014. Similar to Liberia, it has a HeidelbergCement-run grinding plant with Dangote planning expansion soon. Guinea, which had about a sixth of the notified cases of Ebola in mid-October 2014, has seen its cement imports fall by 50% in the year so far compared to 2013.

Before readers become too depressed though, it should be considered that Nigeria has been declared Ebola free by the World Health Organisation after six weeks with no new cases. It may have been relatively expensive to contain Ebola through public health measures but the alternatives for the regional economies could have been worse. More cases are expected to arrive in Nigeria but the country has shown that Ebola can be stopped.

Immediate cement operators threatened by the epidemic include HeidelbergCement with its five grinding plants in west Africa. How an uncontrolled or high case Ebola epidemic affects Dangote's expansion plans in its 'backyard' will also be hard to predict. West Africa is the obvious place for the Nigerian cement giant to build itself up before it tackles other markets in sub-Saharan Africa that have stronger competition like South Africa's PPC. Take this market stability away and Dangote faces a direct economic threat to its growth beyond the humanitarian horror of the epidemic. What also has implications for the cement industry in Senegal, the second biggest cement producer in the region, where there are two integrated plants.

The World Bank report concludes that Liberia, Sierra Leone and Guinea could lose US$129m in GDP in a low case scenario or up to US$815m in a high case scenario. To give this some context, Sierra Leone's GDP was US$2.7bn in 2013. In a high case situation it could lose US$439m or an amount equivalent to 16% of its GDP in 2013. If and when the fight against Ebola turns, this still leaves a severe economic recession for the survivors in what is already one of the poorest countries in Africa. Cement, one of the indicators of a country's economic and industrial development, is intricately bound up in this.

Angola made similar noises to Nigeria this week when one of its government ministers declared that the country was self-sufficient in terms of cement production. The comments came from Industry minister Bernarda Martins at a visit by the Angolan president to the China International Fund Luanda Cement plant. Martins' words echoed those made by Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria, who declared that his country was making more cement than it consumed back in 2012.

Claims of self-sufficiency are all about context. A major or fast growing economy such as Nigeria declaring self-sufficiency in cement could suggest a potential paradigm shift. A smaller economy might simply have risen from a low production base to a slightly higher one with little consequence. So what does this mean for Angola?

The southern African country has a population far smaller than Nigeria at 19 million. Yet, its gross domestic product (GDP) per capita, in purchasing power parity terms, was estimated to be US$6484 in 2014 by the International Monetary Fund, a figure slightly higher than Nigeria's. In nominal terms its GDP was the fifth biggest in Africa in 2013.

Global Cement Directory 2015 research (to be published in late 2014) gives Angola's four integrated cement plants with a total cement production capacity of just under 6Mt/yr. The plant the politicians have just visited has reportedly just increased its clinker capacity to 3.6Mt/yr and another 0.6Mt/yr capacity is planned to join the market when an InterCement plant expands in 2017. Together this places the country's production at around 8Mt/yr. Domestic cement demand was placed at 6.5Mt/yr in early 2014 giving the country a cement consumption of just under 350kg/capita.

Transnational African bank Ecobank declared than Angola was becoming Central Africa's cement production hub in a commodities report in July 2014. Out of the sub-Saharan countries it has become the fourth largest producer after Nigeria, South Africa and Ethiopia and the third largest consumer after Nigeria and South Africa. Angola too has restricted cement imports, like Nigeria. In 2014 the Ministry of the Economy, Industry, Commerce and Construction implemented a stoppage on imports in a phased manner under the auspices of its local cement association, the Association of Industrial Cement of Angola.

Where Angola is different to Nigeria is in the composition of the companies that produce its cement. There is no large local presence to rival Nigeria's Dangote. The former colonial links are there with a plant operated by Brazil's InterCement, who inheritied it from Portuguese company Cimpor. Of the rest, Chinese and South Korean investors figure prominently.

Finally, it is also worth noting that Angola has none of the main sub-Saharan players present including Dangote, PPC or Lafarge Africa. Roughly half-way between the African cement powerhouses of Nigeria and South Africa and with a handy coastline, Angola deserves further attention.

Of the five African cement news stories in this edition of Global Cement Weekly, three concern the actions of Nigerian cement giant Dangote Cement. This week it has announced a new captive power plant in Nigeria and the fact that Sephaku Cement, which is owned by Dangote to the tune of 64%, is now in a position to produce cement from its Aganang plant in South Africa. These two items are fairly typical of the type of announcement that Dangote makes in the African market, and the high frequency with which it makes them. It is the third story, of course, which is unusual.

We have heard, for a couple of years now, that Dangote has designs on becoming a pan-African cement giant. Certainly it is the pre-eminent producer in west Africa, with its influence rapidly spreading to the east, north west and south of this vast continent. Few others, (but perhaps South Africa's PPC), can claim to have such influence and, unopposed, there seems no limit to Dangote's ambitions.

This week we heard just how bold those ambitions are. For the first time Africa's No. 1 cement producer has said that it wants to break out of Africa and enter new markets. No longer satisfied with operating at home, a company release has identified the Middle East and Latin America as potential hunting grounds, either for new capacity or acquisitions. The proposed list of LafargeHolcim cast-offs, which includes few assets in either region (LINK), will also have received significant attention in the Dangote boardroom.

The selection of the Middle East and Latin America, however, is not accidental. The Middle East is a high growth area and provides a platform for possible 'pincer-movement' expansion into more impenetrable markets in central Africa like Chad and (South) Sudan. The Middle East also means proximity to India. Dangote may also want to dampen the influence that Indian, Pakistani and Iranian exports have in the region. Potential tie-ups with Dangote's growing operations in east Africa are clear.

The selection of Latin America, on the face of it at least, is less obvious. There are numerous strong and growing local and regional producers. Not least of these is Colombia's Cementos Argos, which has increased its influence in the USA through strategic acquisitions. There are also numerous domestic large Brazilian producers but Dangote may feel like there is room for more to joint the party. Cade, the Brazilian competition authority, has certainly agreed that competition could be improved in Brazil following its recent investigations. Could Brazil be a prime target?

Wherever Dangote decides to play its first non-African card, it will be a major step for the company and African cement producers. How long until we see the first African-owned cement plant on another continent?

The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.

In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.

Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.

Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.

Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.