Cement firms see beyond the downturn

Posted On Wednesday, 05 October 2011 02:00 Published by Commercial Property News
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Competition in southern Africa’s cement market is heating up even as sales remain distinctly cool in the face of renewed global financial turmoil.

Paul Stuiver PPCCompetition in southern Africa’s cement market is heating up even as sales remain distinctly cool in the face of renewed global financial turmoil.

Despite significant overcapacity in the region, major producers are making strategic acquisitions, upgrading plant and spending billions on new facilities.

Yesterday, Pretoria Portland Cement (PPC) bought three aggregates quarries from Quarries of Botswana for R60m. The quarries will increase overall group aggregates capacity by about 1-million tons a year.

Sephaku Holdings CEO Neil Crafford-Lazarus said yesterday his group would add 2,5-million tons of cement to the market, raising production from mid-2013.

"SA requires infrastructure spend. It is not happening at the moment, but we are coming to market in two-and-a-half years’ time." He said the company would provide a highly competitive product. "We do not see that we will have a problem placing that."

Afrisam CEO Stephan Olivier said yesterday: "The market is still quite flat, but at least not dropping as it had in the past."

He said the company was still selling cement, but margins were being squeezed. "It’s extremely difficult to get price increases with the inflation increases we’re seeing," Dr Olivier said, citing rising energy and transport costs.

He said SA’s private and public sector spending was insufficient to drive growth in the industry.

Nigerian-backed Sephaku, and a Chinese-backed empowerment entity linked to SA’s Women Investment Portfolio Holdings, are investing billions in plants in SA. The projects will ultimately bolster cement-making capacity by nearly 5-million tons a year.

PPC’s executive for the aggregates division, Riaan Redelinghuys, spoke yesterday about the acquisition of the new quarries: "Both Gaborone and Francistown are forecast to be major growth nodes in Botswana."

He said buying the assets of a business made more sense than embarking on greenfield expansion . The purchase was in line with the company’s regional expansion strategy. It wanted revenue from the rest of Africa to make up between 40% and 50% of income by about 2016.

However, PPC has said progress has been "frustrating and slow".

Southern Africa’s largest cement producer is feeling the pain of stagnant markets. It saw headline earnings per share (HEPS) drop 38% in the interim period ended March. But in a September trading update it expected full-year HEPS to be down between 25% and 30%.

PPC CEO Paul Stuiver said earlier the southern African cement industry had "huge overcapacity", being able to produce about 16-million tons a year, with demand having dropped to less than 12-million tons a year.

Recent PPC figures show cement sales volumes in SA had fallen 4%, with exports to neighbouring countries down 35%.

Last modified on Thursday, 27 June 2013 21:42
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