Displaying items by tag: United Cement Company of Nigeria

Nigerian financial analysts Cordros Securities concluded this week that the merger of some of Lafarge’s Sub-Saharan African businesses had reduced earnings at Lafarge Africa. The report is interesting because it explicitly points out a situation where the consolidation of some of Lafarge’s various companies have failed in the wake of the formation of LafargeHolcim.

Cordros Securities’ criticism is that Nigeria’s Lafarge WAPCO performed better in 2013 alone before it became part of Lafarge Africa, with a higher standalone earnings before interest, taxation, depreciation and amortisation (EBITDA) margin. Lafarge Africa formed in 2014, a year before the LafargeHolcim merger was completed, through the consolidation of Lafarge South Africa, United Cement Company of Nigeria, Ashakacem and Atlas Cement into Lafarge WAPCO. Since the formation of Lafarge Africa, Cordros maintains that its earnings per share have consistently fallen, its share price has dropped, its debt has risen, its margins have decreased and its sales volumes of cement have also withered.

Cordros mainly focuses on the Nigerian parts of Lafarge Africa’s business, given its interest in that market and the fact that about three quarters of the company is based in the country. It blames the current situation on growing operating costs since the merger, skyrocketing financing costs for debts and efficiency issues. In Nigeria, Lafarge Africa has had to cope with disruptions to gas supplies. Nigeria’s Dangote Cement had similar problems domestically in 2017 with falling cement sales volumes in a market reeling from an economic recession but Cordros reckoned that Dangote is picking up market share in the South West due to an ‘aggressive retail penetration’ strategy. Finally, Lafarge Africa faced a US$9m impairment in 2017 due to its abandoned pre-heater upgrade project at AshakaCem. The project has been suspended since 2009 due to security concerns in the North-East region. The plant faced an attack by the Boko Haram militant group in 2014 and the group has seemed reluctant to invest further in the site subsequently.

Cordros’ final word on the matter is that with the Nigerian cement market performing slower than it has previously, the local market has become a battleground between the established players of Dangote Cement, BUA Group and Lafarge Africa. What little the report does have on South Africa covers problems with old and inefficient hardware, labour disputes, low prices due to weak demand, high competition and a negative product mix.

Lafarge Africa itself presents a more mixed picture, with market growth picking up in Nigeria following end of the recession but continued market problems in South Africa. Overall, its reported sales grew by 4.8% to US$448m in the first half of 2018 but its EBITDA fell by 25% to US$76.4m. Overall cement sales volumes were reported as up by 5.4% to 2.6Mt in the first half but volumes were still falling in South Africa in the second quarter.

Part of the backdrop to all of this is the intention of Lafarge Africa to cut its debt. In May 2018 its chairman Mobolaji Balogun said that the company wanted to cut its debts by 2020 before continuing with its expansion programme. Part of this process will include a new rights issue later in 2018 to allow shareholders to buy stock at a discount.

It must have made sense, on paper at least, to merge the Lafarge subsidiaries in the two largest economies in Sub-Saharan Africa. Once the merger had settled in, with synergies generating extra revenue, the group could have considered adding extra territories such as Kenya. However, it’s not turned out like that. Two recessions in Nigeria and South Africa respectively, old equipment, debt and serious competition from locally owned producers have piled on the pressure instead. From a stockholder perspective, Cordros is not impressed by the performance of Lafarge Africa. The wider question is: what else did Lafarge and Holcim get wrong when they joined to form LafargeHolcim?

Nigeria: LafargeHolcim plans to dissolve its subsidiary Holcim Nigeria. The cement producer will present the final accounts of Holcim Nigeria as part of a voluntary winding up process at a meeting of shareholders in late August 2017, according to Reuters. LafargeHolcim will take on the shares of the unit when it closes. Holcim Nigeria became a part of Lafarge Africa following the merger of Lafarge and Holcim in 2015 and it originally owned a stake in the United Cement Company of Nigeria (UNICEM) along with Lafarge.

Nigeria: An affiliate of Lafarge Africa, Nigerian Cement Holdings (NCH), has completed a 100% acquisition of Nigeria's third-largest cement manufacturer United Cement Company of Nigeria (UNICEM). Lafarge did not disclose the purchase price. NCH owned 70% equity in UNICEM before agreeing to the deal in November 2014 to buy the remaining 30% from Flour Mills. UNICEM cement plant in Cross River has a production capacity of 2.5Mt/yr and is undergoing an expansion to 5Mt/yr, to be completed in 2016.

Nigeria: According to This Day Life, United Cement Company of Nigeria Limited (UniCem) has denied claims that it was making plans to relocate from Calabar, the Cross River State capital, to Lagos.

UniCem debunked the claims following a publication made by the Cross River State-owned Weekend Chronicle to the effect that the alleged planned relocation had caused internal crisis in the company. However, UniCem has reacted to the speculated relocation plan through a press statement and said that there was no truth in the report.

"United Cement Company of Nigeria Limited (UniCem) has declared as false a publication on the front page of the Weekend Chronicle of 19 June 2015 with the caption 'Crisis rocks UniCem over relocation plan,'" said the statement, which was signed by UniCem's corporate affairs director Ayi Ita Ayi. Ayi said that, "The report is false, misleading and lacking in truth." He added that UniCem operates in Calabar and will never be relocated to Lagos for any reason. He questioned why anyone would contemplate that UniCem, with such a huge investment in Cross River, would relocate its assets to Lagos and expressed surprise over why, a reputable media organisation such as the Nigerian Chronicle, did not cross-check facts before going to press on such a sensitive issue.

Nigeria: The management of United Cement Company of Nigeria (UniCem) has disclosed that the company will suffer losses totalling US$45.2m in 2015 due to the economic downturn currently affecting Nigeria, including devaluation of the Naira.

"The devaluation of the Naira impacts negatively on our business because most of our transactions, like procurement of spares and materials, payment of some of contractors (Macmahon and CBMI), energy cost and servicing of foreign creditors, are basically US$-denominated. Cumulatively, we will have a revenue loss of US$45.2m in 2015 due the devaluation of the Naira," said managing director Olivier Lenoir.

The construction of the line II project at Mfamosing, Akamkpa in Cross River State is on course and will provide employment for hundreds of workers. "This project will at peak employ a total manpower of 1915. At this moment the manpower working in the project is 1290. The operations will determine what the manpower need will be when we handover the project," said Lenoir. "The captive power plant is 85% complete and the civil construction of the second line is at 38%." He added that the major challenges in the project are non-technical and include high level of malaria infection, heavy rainfall and customs clearance problems. Lenoir said that, despite these hitches, UniCem is optimistic that the project will be completed on schedule by September 2016.

Germany/Nigeria: United Cement Company of Nigeria (UNICEM) has ordered the largest Loesche mill to date, a LM 70.4+4. The new LM 70.4+4 will have an output of 370t/hr at 4,700 Blaine in UNICEM's new line in Calabar, Nigeria. The delivery period is 14 months.

The 4+4 concept follows mill types with 2+2 and 3+3 rollers. The 4+4 grinding concept is intended to allow high throughput capacity or it can run in 2+2 roller operation, generating a mill output of 60%.

Loesche will use the Cope gearbox, which was developed in cooperation with Renk and offers a redundancy of up to eight motors at the motor end. With all eight motors in operation, a capacity totaling 8.8MW is achieved. The new Cope gearbox contributes the feature of working without a variable speed drive and operating with a reduced number of motors