CEMENT company PPC said on Monday that "advanced plans" were in place for it to enter the Algerian cement market through a partnership that would see it own 49% of Hodna Cement Company.
The company is already on an African expansion drive, with cement plants being constructed in Ethiopia, Rwanda and the Democratic Republic of Congo.
CEO Ketso Gordhan said the Algerian partnership, with a consortium of private-sector investors who would own the remaining stake in Hodna "gives us confidence that by 2017, 40% of PPC revenue will be earned outside of South Africa".
The company currently derives about 22% of its sales from Africa, outside of South Africa.
The company said its partners in Algeria "have experience in construction and related sectors, and fulfil one of PPC’s key requirements — to partner with local shareholders when investing in a new country".
Hodna will be constructing a 2-million-ton-a-year plant for $350m in the Hodna area, about 300km east of Algiers and close to the university and technology-focused town of Setif.
PPC will acquire a 49% stake of Hodna and assume management control — which allows for the consolidation of the financial results of this project into the PPC group accounts.
The transaction would be funded on a project finance basis, with 80% debt funding from local Algerian banks, PPC said.
"The Algerian cement market is very attractive as consumption exceeds local production by approximately 3-million tons of cement per annum.
"Moreover the Algerian government has committed itself to large-scale capital spending programmes, including the $6bn New City Hassi Messaoud project, which will see the roll-out of thousands of housing units," Mr Gordhan said.
This would boost cement demand in this country, he added.
PPC said that once the feasibility study had been concluded, construction of the plant would take up to 30 months, and commissioning was anticipated by the fourth quarter of 2016.
As with its other expansion projects, PPC said it intended using China’s Sinoma International Engineering as the contractor to supply and build the plant, with support from India’s Holtec Consulting.
Cement selling prices in Algeria range between $80 and $120 a ton, with favourable production costs due to affordable gas prices.
"The factory site is well located with the necessary raw materials in close proximity. The well-developed road and rail network also assist in managing the cost of logistics," PPC said.
With a population of close to 40-million people, of which 74% live in urban areas and a "relatively high" gross domestic product per capita of $5,582, Algeria still requires the construction of 225,000 housing units a year to meet demand, PPC said.
"The national housing shortage in Algeria is estimated at 1.2-million units."
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