Displaying items by tag: Tanzania

Kenya/Tanzania: The administrators of ARM Cement have written off loans worth around US$210m to Maweni Limestone, a subsidiary in Tanzania. The decision by the PricewaterhouseCoopers (PWC) administrators has significantly reduced the cement producer’s assets to US$140m from US$362m, according to the Business Daily newspaper. In a report PWC alleges that ARM Cement had treated its debt to Maweni Limestone as a performing loan, despite the fact that the subsidiary had repeatedly defaulted on it, effectively misleading investors as to the value of the company. The write-off has left ARM Cement’s creditors, including the UK government-backed CDC Group, in negative equity to a value of around US$24m.

Other irregularities that have been discovered amount to US$1.5m. These issues include alleged outstanding director pay, payments to mystery customers and a payment of US$0.4m for ‘fixtures and fittings.’

ARM Cement owns an integrated cement plant at Tanga and a grinding plant in Dar es Salaam that is currently not in operation. It is also building a grinding plant in Tanga that remains unfinished. The cement producer was placed into administration in late August 2018.

Nigeria: Domestic sales volumes of cement by Dangote Cement grew by 11.7% year-on-year to 10.8Mt in the first nine months of 2018, from 9.6Mt in the same period in 2017. However, sales in Sub-Saharan Africa grew slightly to 7Mt due to lower sales in Tanzania, disruptions due to civil unrest in Ethiopia and a reduction in exports from Nigeria to Ghana. This was mitigated by growing sales volumes in Zambia. Sierra Leone and the start-up of operations in the Republic of Congo. The cement company’s revenue rose by 13.5% to US$1.89bn from US$1.66bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 14.6% to US$928m from US$810m.

“Nigerian sales were affected by serious flooding in September 2018 and although Pan-African sales were flat, we will see soon increased sales from Tanzania, now that its gas turbines are installed, and from Ethiopia as local community issues are resolved. We have launched new products in Nigeria that we believe will help us improve our leadership position in Africa’s most exciting market for cement,” said Joe Makoju, Group Chief Executive Officer (CEO).

Tanzania: Energy minister Medard Kalemani has inaugurated a new natural gas connection project to Dangote Cement’s plant at Mtwara. The project is being implemented to two phases with a new power plant planned that will generate up to 45MW, according to the Tanzanian Guardian newspaper. The upgrade will cost around US$875,000. Phase two of the project will see the construction of a 2.7km pipeline to the cement plant as well as supporting infrastructure. This is expected to be completed by the end of October 2018. Using natural gas is expected to significantly reduce the running costs of making the cement, which has been using diesel generators.

Tanzania: The State Mining Corporation (Stamico) has assured cement producers that it holds sufficient coal supplies. It said that 18,600t/month of coal is being produced every month at its mine at Kabuko in Songwe, according to the Citizen newspaper. It intends to increase production to 45,000t/month when demand is ‘high’ and then to later raise production to 60,000t/month when it fixes infrastructure bottlenecks.

In August 2018 cement producers reported that they faced coal shortages. Subsequently, cement prices rose.

Tanzania: Charles Mwijage, the minister for Industry, Trade and Investment, has threatened to cancel the licences of so called cement ‘super-dealers’ if they fail to curb rising prices. Super-dealers are middlemen who acquire cement directly from the producers for sale to distributors, according to the Citizen newspaper. Mwijage made the comments on a tour of the Tanzania Portland Cement Company. He called on the management of the cement company to intervene in order to hold prices down for ends users. However, the cement company wants the government to take action itself against traders.

It’s been a tough week for ARM Cement with the announcement that PricewaterhouseCoopers placed the company into administration on 18 August 2018. Given the performance of the company of late, this is not a surprise. It reported a growing net loss of US$55m in 2017 due to poor demand in Kenya and Tanzania.

First, the company made a series of personnel changes to the board of the company at the start of last week, according to Business Daily and other local press. This was led by the announcement on 13 August 2018 that Pradeep Paunrana would step down as the chief executive officer (CEO). This is significant since Paunrana’s father Harjivandas set up the company, previously known as Athi River Mining (ARM), in 1974. Paunrana was reported as owning 9% share in the company in late 2017 with his family controlling a further 14%. He will remain as a board member. Paunrana’s departure was also joined by Wilfred Murungi who stepped down as chairman following 24 years as a director of the firm and Surendra Bhatia, who will retire as deputy managing director. Although ARM Cement is yet to announce who its new CEO will be it has said that Linus Gitahi will become the new chairman and he has also been appointed as a non-executive independent director. Former Lafarge executive Thierry Metro has also been appointed as a non-executive independent director.

Then, over the weekend PricewaterhouseCoopers (PWC) announced in the local press that it had placed the beleaguered company into administration. Muniu Thoiti and George Weru have been appointed as the lead administrators tasked with the job of either rescuing the company or preserving the best possible value for its creditors. On 20 August 2018 the local stock exchange, the Nairobi Securities Exchange, suspended trading of ARM Cement for seven days.

ARM Cement blamed its woes in 2017 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. Those last two reasons carried resonance this week with the news that the Petroleum Development Corporation and Dangote Industries Tanzania had signed a long-term gas deal. Dangote Cement has also had energy supply problems in the country, being forced to resort to diesel generators at its Mtwara plant. Due to this its 3Mt/yr cement plant only sold 0.2Mt of cement in the first half of 2018, a decrease of 48% year-on-year from the same period in 2017. The forced reliance on diesel also caused earning losses that negatively affected its wider Pan-African area margins.

The general consensus in the local press is that the CDC Group forced the latest changes in management. The UK government-backed investment company owns a 41% stake in ARM Cement. In June 2018 it replaced two of ARM’s board members and appointed a new executive director and a new company secretary following resignations. CDC Group injected US$140m into the firm in mid-2016 in return for a 40% stake in the business. When the Nairobi Securities Exchange suspended trading, ARM Cement shares were a tenth of the value CDC Group paid for its stake. Given that the share value of ARM has steadily fallen since 2016, the question that occurs is: why did CDC Group take so long before taking action?

Two thoughts occur at this point. One: whatever else emerges in the coming weeks and months about how ARM Cement has ended up in administration, it is unfortunate that a burgeoning multinational producer took a hit in more than one country at the same time in an area with such growth potential for construction. As has been proved, market potential and performance are not the same thing. Two: if this is any indication of how the UK government will act in the post-Brexit world generally, then investing in pound sterling assets before the end of March 2019 may be unwise.

Tanzania: The Petroleum Development Corporation (PDC) and Dangote Industries Tanzania have signed a 20-year deal to supply gas to Dangote Cement’s plant at Mtwara. The cement plant will produce up to 35MW of electricity from natural gas and this will later increase to 45MW, according to the Daily News newspaper. The energy supply will allow the unit to increase it production capacity to 6000t/day from 2000t/day and reduce its production costs.

At the ceremony marking the signing, Dangote Industries chief executive officer (CEO) Jagat Rathee said the company has been using an average of 106,000l/day of diesel to produce 2000 – 2500t/day of cement. The 3Mt/yr plant was commissioned in 2015 and is supported by 500Mt of limestone reserves. It is hoped that the new gas deal will reduce the price of cement in the country.

Tanzania: Kenya’s ARM Cement has improved a deal to sell its non-cement businesses by adding additional assets in Tanzania worth US$8.5m for free. Previously, the company said it had reached an agreement to sell its fertiliser and mineral production businesses in Kenya to Switzerland’s Omya & Pinner Heights, a company owned by its ARM’s chief executive officer (CEO) Pradeed Paunrana, for US$15.8m, according to the Citizen newspaper. ARM has added in its annual report
that potential buyers could acquire its non-cement operations in Tanzania for free.

The cement producer reported a loss of US$55m in 2017 due to poor demand in Kenya and Tanzania. It said it was undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems.

Kenya: ARM Cement’s net loss more than doubled to US$55m in 2017 due to poor demand in Kenya and Tanzania. Its sales fell by 32% year-on-year to US$85m from US$127m. Elections in Kenya reduced cement demand, a coal import ban in Tanzania caused production issues at its Tanga cement plant and both countries saw increased competition.

“2017 was the most challenging for the group since the company’s listing on the Nairobi Securities Exchange in 1997. Whilst the management has navigated many business difficulties well in the past, raised capital for expansion, increased net profits and market capitalisation continuously over a 14 year period up to 2015, the challenges of the past year have been unprecedented,” the company said in a statement.

The cement producer says it is undergoing a ‘significant’ review of its current operations, asset base and financing structure to address its problems. It has also been cutting staff benefits as part of its plan to save money.

UK-government investor CDC Group, which holds a 41% stake in the company, has also replaced its board members Ketso Gordhan and Pepe Meijer with Sofia Bianchi and Rohit Anand.

Tanzania: Dangote Cement plans to start using natural gas at its Mtwara plant by the end of May 2018. The decision follows the completion of a new gas pipeline near the plant, according to the Citizen newspaper. The plant has been using temporary diesel generators. A source quoted by the newspaper said that the unit has been using 6Ml/month of diesel at a cost of about US$4.4m. In late 2016 Dangote Cement made a deal with the government to supply natural gas to its cement plant at Mtwara following a temporary shutdown at the site.