Displaying items by tag: South Africa

South Africa: According to Business Day, Sephaku Cement is ramping up production towards a steady state at both its Delmas and Aganang plants.

In the first three months of 2015 to 31 March 2015, Sephaku Cement's revenue increased by 36%, while its earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 39% to US$11.3m. Its operating profit grew by 44% to US$8.87m and its profit after tax grew by 57% to US$3.83m. Sales revenues came mainly from the Delmas plant, which reached steady state production in November 2014. Clinker and cement production at Aganang started in August 2014 and October 2014, respectively.

"We are pleased to have commenced clinker production at Aganang because it has improved our cost efficiencies and enabled Sephaku to remain highly competitive," said CEO Lelau Mohuba.

Sephaku Cement's market penetration continued, as reflected by 29% higher quarterly sales of about US$42.4m. "Our main focus going forward is to sweat the assets and increase free cash flows in preparation for the distribution of dividends," added Mohuba. Sephaku said that the operating environment remained highly competitive, as overall cement demand remained flat and the number of producers had increased. Subdued demand from South Africa's construction industry also resulted in prices remaining flat on a year-on-year basis.

South Africa: Private equity company Pembani Group, investor in Afrisam and Shanduka, a South African investment group, have passed regulatory filings to the Mineral Resources Department and the competition authorities to combine their interests. Pembani acquired the interests of Shanduka following the departure of deputy president Cyril Ramaphosa, who sold his Shanduka stake after rejoining the government in 2014. The deal will also transform Standard Bank's and Ramaphosa's family trust Jadeite's Shanduka stakes into minority ownership in Pembani.

On 1 June 2015 Pembani, which has a US$730m portfolio after the merger, said that the cement industry has a duty to respond to disruptions caused by the entrance of new players, cheap imports and expanded capacity. "Businesses have a duty to respond to changes," said Pembani CEO Kennedy Bungane. He said that the group would pursue opportunities in the rest of sub-Saharan Africa.

The first substantial move by Pembani is likely to be in the cement industry. Although only a 30.5% investor in Afrisam, Pembani controls it through an agreement with the PIC, which is a 66% shareholder. The PIC is also PPC's single largest investor with a 12% stake. Pembani chairman Phuthuma Nhleko is also Afrisam's chairman. Afrisam wrote to PPC, South Africa's largest cement maker, in December 2014, offering a combination of the entities. After considering the proposal, but without presenting it to a shareholder vote, the PPC board rejected the overture in March 2015, saying that it did not believe there would be enough synergies to justify a merger.

Bungane said that the cement industry had undergone permanent changes. "The cement industry in South Africa has changed radically and permanently," he said. "I do not rule out a response by the market to these disruptions." Though Bungane would not elaborate on Pembani's plans for Afrisam, he said it was important for businesses to respond to changing conditions.

Pembani also owns 63% of Tanzania's Tanga Cement, which Bungane said would be used to enter the rest of east Africa, where a shortage of cement capacity makes for good profit margins.

Pakistan: The Pakistan government is working on two options to challenge South African anti-dumping duties on Pakistani exports of cement. The first step will be to hold bilateral consultations with the South African government to resolve the anti-dumping duties favourably. Failing that, then the Pakistan government has the option to take the issue to the Geneva-based World Trade Organisation (WTO), according to an official from the Pakistan National Tariff Commission (NTC).

The International Trade Administration Commission of South Africa (ITAC) imposed provisional anti-dumping duties of 14.3 – 77.2% on Portland Cement originating in or imported from Pakistan from 15 May 2015 for six months. The duty was imposed on bagged cement.

According to local media, Lucky Cement, the major supplier to South Africa with a 55% market share, seems to have had sales volumes little affected by the anit-dumping measure due to its low duty. However, Attock Pakistan, the second largest supplier with a 35% market share, has been the worst hit due to its high anti-dumping duty. Pakistani cement exporters are exploring other markets in southern Africa.

South Africa: PPC has reported that in the six months that ended on 31 March 2015, its profit fell by 38% year-on-year, hurt by slack demand at its mainstay home market. However, its revenue rose by 9% to US$379m during the period.

South African building firms are struggling with weak demand as the government delays rolling out its US$84bn infrastructure investment package. In response, PPC has set its sights on the rest of Africa. It is building plants in African countries like Ethiopia and the Democratic Republic of Congo as part of a wider plan to generate 40% of its sales outside its home market by 2017.

South Africa: South Africa has imposed provisional anti-dumping duties of 14.3 – 77.2% on Portland Cement originating in or imported from Pakistan from 15 May 2015 for six months. Lucky Cement is subjected to pay 14.3% duty, followed by Bestway at 77.2%, DG Khan at 68.9%, Attock Pakistan at 63.5% and other cement makers at 62.7%.

This follows an investigation initiated by the International Trade Administration Commission of South Africa (ITAC) on 22 August 2014 after a number of local cement producing companies submitted an application on behalf of the South African Customs Union (SACU). A number of companies, including Afrisam, Lafarge Africa, NPC Cimpor and PPC, approached the ITAC and established a prima facie case that convinced the commission to initiate an investigation on the basis of dumping, material injury, threat of material injury and causality. However, the application was opposed by Pakistani cement producers, such as Lucky Cement, Bestway Cement, DG Khan Cement and Attock Cement.

The commission found that the industry is suffering material injury through a decline in sales volume and output as well as profits and cash flow. The industry also experienced price undercutting and price suppression. The commission further found that a threat of material injury exists given that Pakistan has increased its production capacity; Pakistan's exports to its traditional markets are declining and imports from Pakistan into South Africa increased by >600% in 2010 - 2013.

The commission made a preliminary determination that Portland cement originating in or imported from Pakistan was dumped into the market. In order to prevent further injury to the industry while the investigation is under way, the commission has requested the SARS (South African Revenue Service) to impose the provisional measures on imported Portland cement originating from Pakistan for six months.

South Africa: PPC will slow its international expansion due to rising debts, says chief executive officer Darryll Castle. The South African cement producer is building cement plants in Democratic Republic of Congo (DRC), Zimbabwe, Algeria and Mozambique in order to generate 40% of its sales outside its home market by 2017. However, spending on these projects is pushing up its debt levels and Chief Executive Officer Darryll Castle said PPC's debt would likely hit as much as US$982m in the next two years and possibly breach agreed covenants with banks, according to Reuters.

"We wouldn't want to stretch our balance too much. The focus currently is on existing projects," said Castle. He added that PPC was in talks with banks about changing the agreed debt covenants to reflect the fact that some of the debt was ring-fenced from the South African balance sheet.

Algeria: The construction works of an Algerian-South African cement plant with a capacity of 2.2Mt/yr will begin shortly, according to Abdelkrim Mansouri, Director General of the Algerian National Development Agency for Investment (NDAI). "All administrative procedures have now been finalised and the initiators of this project will start the work of constructing the plant shortly," he said.

This project is the result of a partnership between Hodna Algerian Cement Company and leading South African cement producer PPC, concluded in accordance with rules that stipulate a maximum 49% ownership by foreign firms in Algerian-based investments. At a total cost of US$287m, the plant will be 80% financed by Algerian banks and 20% financed by the two joint venture partners.

The other big cement producer merger collapsed this week when PPC announced that it had terminated discussions with AfriSam. Details were scant due to a confidentiality agreement between the South African cement producers. However, the CEO of PPC, Darryll Castle, confirmed that neither party could agree the terms of the merger. PPC's shares rose by 5% on the news of the breakdown.

Financially the decision may have made sense. As an unlisted company AfriSam doesn't publish its financial results but PPC did report a revenue of US$742m in 2014. Comparing cement production capacity in South Africa gives PPC 4.75Mt/yr and Afrisam 3.50Mt/yr. Roughly this is a 58:42 split although this doesn't take into account both companies' aggregates, ready-mix concrete and other product concerns.

It's possible that disagreements over the value of the two companies caused the breakdown. At the time the merger was first proposed in December 2014 PPC was reeling from the resignation of its CEO Ketso Gordhan in September 2014. Some media commentators viewed the proposal as opportunistic on the part of AfriSam given all the internal problems PPC was coping with. Also, given that the combined companies would have held a 60% share of the market, it is likely that the Competition Commission of South Africa would have taken a keen interest.

The uneven ratio of sizes between the two companies considering merging is similar to the problems now facing Lafarge and Holcim. The European building materials companies started out trumpeting their merger of equals before Lafarge's relative poor financial performance and fluctuating currencies made a mockery of this parity. Once this became clear then major shareholders in Holcim started to question the merger.

Back to Africa, the question with PPC and AfriSam is whether they should have swallowed their differences in view of future growth. With Dangote expanding across the continent and Lafarge consolidating its local activity under the Lafarge Africa banner it seems like the time to merge resources and expand.

AfriSam has been saddled with debt since a buyout in 2007 when Holcim reduced its share from 85% to 15%. In 2011 it agreed to pay a penalty of US$16m, representing 3% of its 2010 cement annual turnover in the Southern African Customs Union, due to cartel activity. Then in 2013 investment holding company Pembani Group reduced AfriSam's debt for shares and a controlling say on its board. By contrast PPC has been expanding across Africa, in countries such as the Democratic Republic of Congo (DRC), Zimbabwe, Algeria and Mozambique, to boost foreign sales to 40% by 2017. The programme is anticipated to raise PPC's cement production capacity from 8Mt/yr to 12Mt/yr.

Domination at home in South Africa and firm plans for continental expansion suggest that this deal wasn't in PPC's interest, although its domestic cement sales have declined which may have also made the case for consolidation more tempting. Dangote's progress in west African must be both inspiring and troubling for South African cement producers.

South Africa: PPC and AfriSam have called off a merger of two of South Africa's largest cement producers after failing to agree on the price.

The possibility that regulators may have blocked the proposed deal due to competition concerns was also discussed during the three months of talks, as the two companies would have controlled about 60% of the South African market. PPC spokeswoman Azola Lowan declined to comment on the reasons for the deal collapse.

PPC received an offer in December 2014 to combine with AfriSam and jointly expand into new African markets. "Over the last few months, we applied our minds extensively to the proposed merger with AfriSam," said PPC CEO Darryll Castle, who was appointed in December 2014. "Ultimately we decided not to proceed with the proposed deal."

South Africa: The board of PPC are considering an indicative non-binding proposal from AfriSam Group for a merger between the two cement producing companies. PPC will make a further announcement once its board had concluded the consideration process, according to Pretoria News. The Public Investment Corporation, the managers of the Government Employees Pension Fund, holds a 12.6% share of PPC and a 66% share of AfriSam.