Displaying items by tag: Nigeria

Nigeria: The Standard Organisation of Nigeria (SON) has explained why the agency has restricted the use of 32.5 grade cement and why it has urged manufacturers to commence the production of 42.5 grade cement.

The director general of SON, Joseph Ikem Odumodu, said that the restriction placed on the use of low grade cement was important to mitigate the problem of building collapses in the country. It is estimated that from 1974 to 2010, collapsed buildings have claimed about 297 lives.

Odumodu said that Nigeria cannot afford to be a 'pariah state' on the issue of cement quality, adding that world's progressive countries have stopped using 32.5 grade cement. He said that SON has restricted the use of 32.5 grade cement and will enforce compliance.

Dangote Cement is the only company that currently produces 42.5 grade cement in Nigeria. Odumodu said that companies that have decided to continue 32.5 grade cement production have done so for profiteering.

SON had issued a directive that 52.5 grade cement must be used for bridges, 42.5 grade cement can be used for casting of columns, beams, slabs and for moulding blocks, while 32.5 grade cement can only be used for plastering.

Nigeria: Final approval for a new national cement standard has been given by Olusegun Aganga at the Federal Ministry of Industry, Trade and Investment. Following a short grace period all cement manufactured locally or imported must meet the approved standards and will be tagged 'NlS 444-1'. The implementation of a new standard for cement follows a battle between cement industry stakeholders regarding whether poor quality cement had been to blame for building collapses.

The highest grade - CEM I 52.5R, 52.5N, or 52.5 - will now be used for the construction of bridges. The second highest grade - CEM II 42.5R, 42.5N or 42.5 grade – will be used for the casting of columns, beams, slabs and for block moulding. The lowest cement grade - CEM I & II 32.5R, 32.5N or 32.5 cement grade – will be used only for the plastering of buildings.

According to the ministry, the new guidelines would, "Enable the end users make the right choice; help to avoid unethical application of the different types of cement; enhance proper identification of the different cement classes and enhance traceability as well as guide users." The ministry added that the standards were reviewed because they had attained the five-year mandatory period for review, as well as concerns over the quality of cement in the Nigerian markets.

Nigeria: Dangote Cement has reported that its first quarter pre-tax profits fell by 1.25% year-on-year to US$331.7m. Gross earnings rose to US$652.5m compared with US$599.9m in the same period of 2013.

Dangote's chairman, Aliko Dangote, disclosed that its expansion drive would increase capacity and add an additional 9Mt/yr of production capacity by July 2014, expressing satisfaction that cement imports into Nigeria had continued to fall. An estimated 1.1Mt of cement was imported in 2013, down from 1.9Mt in 2012.

Dangote vowed that the company would stop at nothing to expand, as most of Nigeria's neighbours are currently importing cement from the Far East. "We are confident that Nigeria's cement will prove more attractive than the imports, particularly within the 15 member Economic Community of West African States (ECOWAS)," he added.

To stabilise the price of cement and free the consumers from 'profiteering middlemen,' Dangote said that his company would intensify its direct-to-consumer deliveries.

Holcim released its first quarter results for 2014 this week and benefits of a merger seemed clear: both sales and profit were down. Net sales fell by 5.4% to Euro3.35bn and net income fell by 57.5% to Euro65.6m. However, Chief Financial Officer Thomas Aebischer was upbeat on meeting the regulatory requirements of any merger and the prospect of divestment opportunities.

This week we have a guest contributor - Andy Gboka, an analyst at Exotix LLP, a London-based broker specialised in Frontier markets – writing about the impact in Africa from the Lafarge-Holcim merger:

No change in Sub-Saharan Africa cement markets

Looking at (1) the location and size of the assets that both groups operate across the region but also (2) the expansion projects recently announced, we do not anticipate any upheaval in the competitive landscape, at least in the medium term.

Potential reshuffle of African assets

We identify Nigeria and Morocco as the main countries where the two companies are likely to reorganise their operations post-deal.

After the market excitement Lafarge / Holcim's price gains have averaged 9% since the announcement versus +8% the same day (04/04/14). We think it timely to discuss, from a competition angle, the likely impact on sector dynamics in Africa.

Starting with Sub-Saharan Africa where Lafarge and Holcim have been present for decades, the two groups have grown their output capability over time to reach a combined ~20.7Mt/yr. Holcim is a much smaller cement producer through its ~2.6Mt/yr in Ivory Coast, Guinea and Nigeria, whereas the French manufacturer is a regional leader with ~18.1Mt/yr capacity across 10 different countries. North African exposure paints a similar picture, as the Swiss company's installed capacity is ~9.6Mt/yr versus ~21.6Mt/yr for Lafarge (including their respective shareholdings in Lafarge Cement Egypt).

Although we do not believe the proposed merger will significantly alter Africa's competitive environment, business reorganisation is likely in:

(1) Nigeria. LafargeHolcim would control more than ~70% of the United Cement Company of Nigeria Ltd (UNICEM, 2.5Mt/yr in Calabar) which, in our view, is a suitable context for minorities' buyout.

(2) Morocco. More than ~50% of the industry's production capacity is controlled by the two players, a situation that may lead to asset disposals after review by the local competition commission.

Beyond the corporate implications, this announcement also puts into perspective the multiples investors are willing to pay for companies operating in Africa. Indeed, for 2014/2015 financial year the enterprise multiple (enterprise value / earnings before depreciation and amortisation) and price-to-book ratio for the main stocks listed in Nigeria and Kenya average 10.3x and 2.9x respectively, vs. 8.4x and 1.3x for LafargeHolcim (Bloomberg). While demand growth prospects in the teen digits or margins above ~25% (especially in Nigeria) would support a premium for the former names, we think the extent of that premium is questionable.

The best illustration is Dangote Cement, whose market capitalisation stands at ~US$25bn for total capacity estimated at 50 – 55Mt/yr by the 2016 financial year, relatively high when compared to the expected ~US$55bn market capitalisation for LafargeHolcim with (1) 427Mt/yr cement capacity globally and (2) ~60% of its revenue from emerging markets. This underpins our cautious stance on the sector.

Source: Andy Gboka, analyst at Exotix LLP (London-Based broker specialised in Frontier markets).

Andy Gboka will be speaking at the forthcoming Global CemTrader Conference, taking place in London on 2 -3 June 2014.

Nigeria: Property firm Haven Homes Ltd is worried that the exorbitant price and low availability of cement in Nigeria will slow the pace of housing construction, lamenting that just a few firms have monopolised cement production.

"At the moment only Dangote Cement and Lafarge Cement are consistently producing cement in the entire country. For a population of 160 million that is not good enough, that sort of monopoly makes the product too expensive," said Tayo Sonuga, Haven Homes' managing director and CEO. "Cement is too important to be left to the vagaries of private or public monopoly. You cannot build without cement so the government cannot remain silent about this matter. It calls for urgent action."

Nigeria: BUA Cement has signed a gas sales and purchase agreement with the Nigerian Gas Company for its subsidiary, the Edo Cement Company. The agreement is for the supply of about 0.9Mm3/day to the Edo cement plant in Okpella, according to managing director Saidu Mohammed.

BUA Group entered the cement industry in 2008 when the Federal Government of Nigeria issued cement import licenses to 13 companies, including BUA, in an effort to bring down its price locally. BUA Cement subsequently purchased a floating cement terminal in 2008 for processing and bagging bulk cement. In 2009 BUA acquired controlling stakes in the Cement Company of Northern Nigeria (Sokoto Cement) and the Edo Cement Company.

Nigeria: Dangote Cement expects to double its cement production capacity across Africa in 2014 to 40Mt/yr, according to Devakumar Edwin, chief executive of Dangote.

Edwin said that in Lagos the firm would add 9Mt/yr of capacity, bringing it to 29Mt/yr. Dangote will also open plants across Africa that have been several years in the making, adding a further 11Mt/yr of production capacity.

Dangote Cement saw its 2013 profits increase by 40% to US$1.16bn, up from US$498bn in 2012. "The key driver is the increase in volumes. We have kept a focus on controlling costs, however, our focus on volume growth is what has increased our profits," Edwin said.

Dangote has cement plants spanning Africa, though most are in the construction phase. Between them they contribute less than 1Mt/yr to the group's current overall production capacity. That will change in 2014, as plants in Senegal, Sierra Leone, Cameroon, Zambia, South Africa and Ethiopia begin operations. Additional capacity in Ivory Coast, Ghana, Liberia, Tanzania, Congo and in Nigeria would mean that by mid-2016 Dangote is expected to have a 60Mt/yr capacity.

Almost all of the expansion has been funded with internal cash flows, according to Edwin, unlike rivals. "Other cement majors borrowed heavily for mergers. One of the key reasons we have been able to grow aggressively in the African market is because they are cash strapped and we do not have that problem," he said.

Nigeria: Ashaka Cement plc has come out against the Nigerian government's plan to ban the production of 32.5 grade cement in Nigeria. The Chairman of Ashaka Cement, Alhaji Umaru Kwairanga, said that rather than ban 32.5 grade cement, it should be produced alongside 42.5 grade cement. This would not only provide consumers with the freedom of choice, but also assist in securing jobs that have already been created through the production of 32.5 grade cement.

There had been arguments that the use of the 32.5 grade cement in the construction sector was a major reason for the increase in building collapse, which resulted in the formation of a technical committee to review cement standardisation by the Standards Organisation of Nigeria (SON).

"Cement is not responsible for building collapses in Nigeria," said Kwairanga." So much research has already been done and we have seen that building collapse is more related to issues other than the cement itself. It's either from the professionals or consultants that are handling the building jobs, who have not followed the specifications."

Kwairanga added that Ashaka Cement has approved plans to expand its operation with a US$606m investment in cement production in Gombe. The amount would increase the cement production capacity of the company to 2.5Mt/yr. Barring any last minute change, the ground breaking ceremony for the project will be performed by the Nigerian president Goodluck Jonathan in early April 2014.

Kwairanga said, "We are taking our US$606m investment to the north-eastern state of Gombe. The total value of setting up the 2.5Mt/yr cement plant and a power plant is US$705m.

Nigeria: The Standards Organisation of Nigeria (SON) has led a group of cement industry stakeholders is stating that poor construction practices and not the quality of cement is to blame for the growing incidence of building collapse in the country. The position was taken at a recent meeting in Lagos by the technical committee of stakeholders and put together by SON to review the cement standardisation in the country.

Speaking at a press briefing Lanre Opakunle, general manager of Industrial Performance at Lafarge WAPCO, said that the committee unanimously agreed that cement is not responsible for building collapse. According to the committee, factors like poor or low quality application at building construction sites, poor construction practices, poor supervision as well as corruption are mainly responsible for building collapses.

The meeting stressed the need for cement manufacturers to review their standards to align with the European standards. Cement producers were advised to indicate the usage and application of the cement types on their bags in a legible and clear manner.

Nigeria: The United Cement Company of Nigeria Limited (Unicem) is investing US$510m in an additional 2.5Mt/yr state-of-the-art cement line to double its existing capacity to 5Mt/yr by 2016.

Sinoma Group is constructing the 2.5Mt/yr new cement line. The project includes the construction of a new 45MW captive power plant by Wärtsilä Nigeria Limited. Work on the project has already started.

Managing director of Unicem, Olivier Leonir, said that cement demand had continued to grow nationally and regionally, especially within the south and south-east regions, with demand currently growing at about 12%/yr.

Leonir said that the project has a lot of economic and social benefits to the people of Cross River state and its neighbouring communities, adding that, "Unicem has a strong commitment to develop local capacity through various initiatives such as the Unicem Community Development Initiative (UCID) and the Graduate Trainee Scheme. We have been enlisting and training young people from the community as mechanical technicians and training young graduate engineers to fill the local manpower gap."

Leonir said that Unicem is also building a US$30.4m 20km cement road infrastructure to cater for the expected traffic increase and to reduce the movement of articulated vehicles within Calabar when the project is completed.