ZIMBABWE: PPC Zimbabwe Q3 cement sales decline on reduced construction activity

Regional cement producer Pretoria Portland Cement says the completion of major infrastructure projects in Zimbabwe has led to double digit declines in local sales, while exports have been hit by weakening currencies in target markets.

PPC is constructing an $80 million cement plant in Harare, which will have capacity to produce 680,000 tonnes annually.

The company has cement manufacturing plants at Cementside in Bulawayo and Colleen Bawn in Matabeleland South.

The Harare project among others in Africa is expected to boost the demand of cement products.

“The conclusion of major infrastructure projects in Zimbabwe has led to double digit declines in local sales and cement exports have also reduced significantly on the back of exchange rate effects,” said PPC board chairman, Bheki Sibiya in a trading update for the quarter October to December 2015 released on Monday.

ZIMBABWE: PPC plans second Zimbabwe plant

PPC is on track to commission its second cement manufacturing plant in Zimbabwe in the second half of next year.

The listed cement and lime producer is building its new 700 000 tons-a-year plant at Msasa near Harare at a cost of $80 million (R1.02 billion).

Speaking at the ground-breaking event, Njombo Lekula, the managing director of PPC, said this week at the site for the new PPC Msasa plant that it was being built in direct response to the opportunity PPC saw in and beyond this region.

PPC has a target of generating 40 percent of its total revenue from outside South Africa by 2017, compared with about 28 percent now. Including its second Zimbabwe plant, PPC has four cement manufacturing plant projects in Africa. The other projects are in Rwanda, the Democratic Republic of Congo and Ethiopia.

Lekula said the investment PPC was making in the Msasa plant was a vote of confidence in Zimbabwe’s future and an expression of its commitment to build, grow and contribute meaningfully to the national economy while delivering on local imperative.

“PPC Zimbabwe is looking to the future of the country, with today’s event providing a promise of things to come. While our existing factory in Bulawayo has positioned us well in Matabeleland, it’s clear that much of our country’s future growth centres around Harare and northern Zimbabwe,” he said.

Lekula said the Msasa plant was being built to world class standards and would feature bulk-handling and palletising capabilities, such as those introduced at the Bulawayo factory. The plant is being built by China’s Sinoma International Engineering.

But Lekula said PPC was engaging with numerous local suppliers to leverage the scope of opportunities on this project beyond the main engineering, procurement and construction management (EPCM) agreement.

“Because almost 70 percent of the total value of the EPCM is allocated to the supply of actual plant equipment, it was necessary for us to contract with a provider of the likes of Sinoma to ensure we create a world class plant in and for the region.

“Sinoma has contracted local labour as part of its workforce on the project, as well as meeting our non negotiable local supply requirements,” he said.

Key player

Lekula added that local contractors, including JR Goddard Construction, Ascon-Tencraft and HVC, had already worked on the project. He said PPC Zimbabwe was already a key player in the large infrastructure projects that were under way in the country and working hard to be involved in those still in the planning phase.

“As Zimbabwe’s largest producer of ordinary Portland cement and the only producer of 42.5 cement, we are ideally positioned to play a leading role in developing the country’s infrastructure. We have the equipment, processes and tanker fleet in place and are thus able to handle the bulk deliveries that are vital to these big projects. As such, we see ourselves as providing not just cement but a total solution to our customers,” he said.

Shares in PPC fell 0.27 percent yesterday to R22.04.

ZIMBABWE: Cement firm brings hope to Redcliff

Redcliff is set to get a new lease of life after a cement manufacturing company sets up a $10 million plant in the town.

The town had been forgotten after its prized possession, Ziscosteel closed more than five years ago and attempts to revive the giant plant yielded nothing.

Redcliff mayor Freddy Kapuya told Standardbusiness last week that his council had a special meeting on Monday where it finalised a deal with Mortal Investments which is owned by Chinese and local investors.

The Chinese investors have 25% shareholding with the remainder owned by a local consortium.

“We sold them nearly 100 000 square metres of industrial land which they are expected to turn into a giant cement manufacturing plant next year and employ nearly 400 workers,” Kapuya said.

Council said it had by end of Tuesday received a payment of $600 000 for the land deal and was now expecting work to start soon.

Kapuya said the investment had already been approved by the Zimbabwe Investment Authority (ZIA) and his council, reeling from financial difficulties owing to the collapse of Ziscosteel, had offered Mortal Investments a three-year rates rebate.

“We are so excited that the ZIA approved investment will take shape here at a time hope for the re-opening of Ziscosteel is fading. Redcliff will now be looking elsewhere,” he said.

Cement companies are attracted to Redcliff because it brings them closer to slag, which can be found in mountains at Ziscosteel. Slag is one of the major raw materials needed in the manufacturing of cement.

However, Kapuya believes that Ziscosteel could have run its course and his town will now have to rely on other investment opportunities such as the cement project.

Redcliff has vast tracts of land which continues to lie idle as land developers don’t see themselves realising value if Ziscosteel is not resuscitated.

ZIMBABWE: Lafarge to invest more on plant upgrades

Zimbabwe Stock Exchange-listed cement manufacturer Lafarge Cement Zimbabwe has secured approval from its France-based parent company, Lafarge Group, to invest an additional $5 million on plant upgrades this year. 

The cement maker last year announced plans to invest about $10 million-$15 million on upgrading its milling plant to increase production by nearly a third of current capacity and bring approved investment threshold to $20 million. According to the company, the plant upgrades will push its volumes to 500 000 tonnes of cement per annum from 390 000 tonnes. 

Speaking on the sidelines of the company’s annual general meeting, Lafarge Zimbabwe chief executive Ms Amal Tantawi told The Herald Business that the company has managed to secure an additional funding for the upgrade of the plant. “We are continuing the investment. We secured an approval for an additional $5 million and all the investments will go towards rehabilitation of the plant, refurbishing inlets to the kiln and other small things that will reduce costs. 

“In terms of our outlook for 2015, we are slightly above budget when it comes to EBITDA. Preparatory work done at the plant has started bearing fruits and we hope this new investment approved will go a long way in enhancing our cost-cutting initiatives based on plant efficiencies,” said Ms Tantawi.

She said despite the difficult economic environment, Lafarge invested $7,2 million in capital programmes, with $5 million going to limestone quarry development. Ms Tantawi said the company has found it difficult to export citing lack of competitiveness as the biggest challenge for the leading local cement manufacturer. 

“As Lafarge we cannot compete on the export market at the moment because our business environment at the moment is expensive to operate on and it’s difficult to compete with cement from the east coast, Pakistan and China. 

Demand has been flat and recently we have seen the entry of new players in the local market where disposable incomes remains subdued coupled with lack of huge infrastructural projects,” said Ms Tantawi. The Lafarge CEO said as demand remains subdued, they have implemented differentiation strategy. 

She said new players coming into the market were imitating their brands and Lafarge is working towards strengthening its brand equity. She said the coming of new players on the domestic market has seen Lafarge Zimbabwe’s market share declining to 27 percent from 31 percent last year. “At the moment we stand at 27 percent in terms of market share down from 31 percent,” she said. 

The company’s revenue for the year to December 2014 was down 11 percent at $60 million from $67 million in the previous comparative period as a result of a reduction in local sales volumes and cement selling prices. The liquidity constrains and the low average manufacturing capacity utilisation continues to have an adverse impact on the company’s business activities. 

Last year the company incurred high maintenance costs in the first half of the year, following major plant maintenance works undertaken to improve performance. Despite the difficult operating environment the company recorded a modest operating profit before income, finance costs and tax of $1,1 million last year.

ZIMBABWE: Imara to facilitate $70m PPC loan

Harare-based Imara Fiduciary has been appointed security agent for PTA Bank to facilitate the extension of a $70 million loan to PPC Zimbabwe. The loan will fund the construction of a new cement factory in Harare.A specialist service provider registered as a bond-holding company, Imara Fiduciary, will hold tangible PPC security on behalf of PTA and other investors. 

“We are delighted by the appointment by PTA Bank for the purposes of facilitating vital infrastructure investment in Zimbabwe. We regard it as an endorsement of both our strategic vision and business model,” said Imara Fiduciary executive director Mr Markus de Klerk. 

“Risk mitigation by Imara Fiduciary is an efficient and cost-effective mechanism for achieving increased peace of mind by lenders and investors while giving the borrower a flexible and scalable security platform with a minimum of delay and red tape.” 

Mr de Klerk said they provided a boots-on-the-ground service that supports funding deployed where it is needed, while timely and accurate reporting to the investor promotes effective working relationships and helps drive the project forward within the envisaged time-frame. 

PTA is the treaty-based Eastern and Southern African Trade and Development Bank. Its mission is to advance the economic development, integration and prosperity of the regions it serves through the extension of development capital and associated services.

“The security and debenture services of Imara Fiduciary add value in an environment where credit and other risks have to be solidly and credibly mitigated to ensure the confidence of financiers, especially international financiers,” said PTA Bank president Mr Admassu Tadesse. 

Mr Tadesse said there is no doubt that Zimbabwe has a great deal of need for financing and investment in its productive and infrastructure sectors and expansion of cement capacity is an important contribution in this respect. 

He said PTA Bank is pleased to have partnered with PPC to co-finance this sizeable investment in Zimbabwe’s private sector and the industrial economy. 

Imara Fiduciary was formally launched in Harare in early 2014 after ground-breaking work by Imara in the Zimbabwe corporate debt market. 

By early this year, Imara had raised more than $50 million in corporate debt.

Imara Fiduciary, a registered bond-holding company, provides banking and debt solutions to corporates, individuals and public-private partnerships while creating a simple, robust entry and exit to the secured corporate debt market, thereby facilitating greater syndicated and direct participation in the Zimbabwe economy by foreign investors. 

Specifically, it provides debenture, security trust and corporate governance services and functions as a non-discretionary agent managing security structures and mandatory prepayment or escrow account arrangements. It is a dedicated, boots-on-the-ground risk mitigator; not a risk underwriter.

ZIMBABWE: CEMENT MANUFACTURER PPC OPTIMISTIC

Cement manufacturer PPC Zimbabwe is positive its acquisition of an indigenisation certificate in 2012 will enable it to forge ahead of competition as the building industry improves.

Business Development and Corporate Strategy director Gavin Stephens said the company, asubsidiary of PPC South Africa, is in the process of implementing the indigenisation law. “We are in the process of implementing this ahead of the competition. It will give the community and employees shares in the company,” he said.

“While we have enjoyed a growth in market share we still have an extensive capacity,” he said. Since the country adopted multiple foreign currencies, the cement industry has enjoyed a solid recovery and good growth.

During the hyper-inflation period, cement sales dropped to 400 000 tons a year compared to an industry high of 1,1 million in 1999.

However fortunes have recovered for the industry and PPC is on a drive to grow the company in the region.

The company boasts of operating in emerging markets, where 70 percent of the world’s cement is produced, a factor that has allowed it to grow. Last year the parent company’s annual report commended the Zimbabwean operation for recording a fifth consecutive financial year of growth.

“Cement volumes were under pressure in South Africa and Botswana, while sales volumes in Zimbabwe continued to improve,” executive chairman Bheki Sibiya said.

“Sales volumes in South Africa were affected by poor economic growth, increased strike activity and above-average rainfall, whilst Zimbabwe enjoyed a fifth consecutive year of rising cement demand, albeit on a slower growth trajectory than prior years,” he said.

PPC has nine manufacturing facilities and three milling depots in South Africa, Botswana and Zimbabwe that can produce around eight million tons of cement products each year.

Investment at the company’s Bulawayo plant, which grew capacity from 650 000 tons to 1,1 million tons made the ability to maximise volume possible.

ZIMBABWE:Lafarge plans USD 250m cement factory

Lafarge, the French cement, aggregates and concrete multinational, may invest up to USD 250m in building a new cement plant in Zimbabwe, The Herald reported on 17 June.

The report cited Amal Tantawi [chief executive of Lafarge Cement Zimbabwe], who said that the search was continuing for feasible limestone deposits and for a suitable location for the factory.

According to Tantawi, Lafarge has budgeted for the plant as part of its sub-Saharan Africa spending.

AFRICA: PPC banks on new African projects to boost product sales

The release of major infrastructural projects in South Africa, Botswana and Zimbabwe would provide a key driver for demand for cement products in the region, listed cement and lime producer PPC said yesterday.

In a trading update for the quarter to December last year, PPC chairman Bheki Sibiya said the South African trading environment would remain tough and highly competitive but PPC believed its various response strategies had positioned the company well.

Sibiya said PPC’s normalised earnings for the first half of its financial year were anticipated to reflect a year-on-year improvement.

He said the operating environment in South Africa remained tough with low single-digit cement volume growth achieved in the first quarter, along with price increases.

Sibiya added that both the inland and coastal regions recorded positive growth while growth in cement volumes was also achieved in Zimbabwe, with exports from that country showing “a pleasing trend”.

Volumes in Botswana and Mozambique continued to be under pressure due to weak demand and intense competitor activity but some increases in selling prices were still achieved in these territories.

Sibiya said the performance in the lime division was beginning to show a positive trend while the South African aggregates division had achieved pleasing volume growth due to increased off-take in road, retail and residential projects.

Sibiya added that PPC’s expansion strategy remained well on track and construction of its new operation in Rwanda was progressing well, with commissioning of the plant anticipated at the end of this year.

Construction work had now also commenced at PPC’s sites in Ethiopia and the Democratic Republic of Congo (DRC), and additional opportunities were currently being pursued.

PPC said last year that it aimed to have three new plants under construction by the end of the first quarter of this year in the DRC, Ethiopia and Zimbabwe, while its plant in Rwanda was scheduled to come on stream in September.

The company said it had also earmarked a fifth project in an as yet undisclosed country, with its capital expenditure budget for this financial year totalling about R2.7 billion.

PPC has expanded into the rest of Africa with the target of generating 40 percent of its revenue from outside South Africa by 2017.

The move has been prompted by increased competition in the South African cement market and lower margins at home.

The increased competition follows JSE-listed Sephaku Holdings associate company Sephaku Cement earlier this month commencing with cement production at its Delmas milling plant, where output is expected to be ramped up to 1.4 million tons a year by the middle of this year.

Sephaku Cement has another major project, Aganang, an integrated plant located in Lichtenburg in North West, where production is targeted to commence by the second quarter of this year.

About R3.3bn has been invested in establishing Sephaku Cement’s new cement plants, which once fully operational will have a total annual capacity of 2.2 million tons.

In December PPC acquired a 69.3 percent stake in Safika Cement Holdings for R377 million, which followed its acquisition in 2012 of an initial 25 percent shareholding in Gauteng readymix and fly-ash supplier Pronto Holdings, with the remaining shareholding bought on a phased basis over a two-year period.

PPC shares fell 2.70 percent to close at R29.51 yesterday.

ZIMBABWE: US$50m cement plant for Masvingo

A CHINESE backed company, Zimbabwe Zhongxin, intends to build a cement plant in Masvingo at an estimated cost of US$50 million, a source familiar with the deal said.

The company initially wanted to construct the plant in Chimanimani but had to relocate to Masvingo where “substantial” limestone deposits were found.

Zhongxin Coking is the controlling shareholder in Zim Zhongxin with 70 percent shareholding while a local consortium, Qualisave Minerals Investments owns a 30 percent stake.

The source said the project may commence during the first half of the year once the company obtained all regulatory permits. The project has potential to create 400 jobs.

In terms of complying with the indigenisation and empowerment laws, the source said “the foreign partner will gradually release some of the shares to the locals until they are compliant”.

“The Chinese are bringing in capital of close to US$49,5 million and the contribution from the locals is quite insignificant for them to have a controlling interest,” said the source.

“As such, negotiations are ongoing with the relevant authorities. The proposal is that the Chinese investors will gradually release some of the shares to the local partners in coming years.”

Zimbabwe’s cement market is looking bright with demand expected to increase thanks to various infrastructural projects on the cards and some already underway. With an infrastructure backlog of US$14 billion, the cement demand is expected to significantly rise in the medium to long term.

Under Zimbabwe’s new economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation, Government has come up with an infrastructure cluster focused on the rehabilitation of infrastructural assets and the recovery of utility services.

These services relate to water and sanitation infrastructure, public amenities, information communication technology, energy and power supply, transport (road, rail, marine and air).

Local cement companies are also poised to benefit from the growing demand in residential and non-residential construction. Pretoria Portland Cement, Zimbabwe’s largest company said it will start constructing a US$200 million cement plant in the north-eastern part of the country this year.

The construction, expected to begin during the second or third quarter of this year, will be completed at the end of 2016, Mr Gavin Stephens, PPC Zimbabwe’s director of business development told this paper in November last year.

The combined cement output would be 1,2 million tonnes per annum, adding about 250 direct jobs.

While analysts have pointed out that the primary risk to the construction sector was the shortage of international finance and foreign direct investments, PPC Zimbabwe chairman Mr Bhekokuhle Sibiya said last year prospects in Zimbabwe were bright.

“With elections in Zimbabwe concluded, we expect continued growth in cement demand.

“The market has been dominated by retail clients and we look forward to increased infrastructure investment,” said Mr Sibiya.

AFRICA: ZIMBABWE-: PPC TO INVEST US$ 420 MILLION IN ZIMBABWE

The Zimbabwe government-owned newspaper, The Herald, reports that Pretoria Portland Cement (PPC) says it will spend about US$ 429 million on capital projects over the next few years. PPC’s investment plan will see the expansion of production capacity at the Riebeck and De Hoek operations in the Western Cape, which will increase cement output by 50%. PPC has also replaced its clinker operations at Colleen Bawn to sustain high output following high demand for cement in Zimbabwe. The company says that demand for cement in Zimbabwe remained above 100%, although sales were lower in the second half of the year compared to the first six months of 2010. Local operations were severely affected by rolling power cuts and the upgrade at Colleen Bawn, which took longer than expected, resulting in the import of clinker from South Africa.

PPC said sales volumes declined 13% in South Africa, Botswana and Zimbabwe as demand in Botswana and South Africa fell. Capital expenditure for the year under review totalled R658 million. The company said it would continue to invest in sub-Saharan Africa where development has not reached levels attained by South Africa. It will target the emerging markets of Mozambique, Angola, the DRC, Tanzania, Kenya and Uganda.

PPC registered an operating profit of R2.1 billion, which was 13% down on the previous year after revenue totalled R6.8 billion in the full year to September.

AFRICA: ZIMBABWE: Lafarge Cement Zimbabwe re-brands

Lafarge Cement Zimbabwe has unveiled its new brand and has pledged to splurge a substantial amount of money on a three-month marketing and advertising campaign that kicks off this month.

Communications manager, Nyaradzo Makombe-Hazangwi, said the cement manufacturer had already "spent a lot" as it seeks to secure the Lafarge brand, which officially took over from the Circle Cement brand on Tuesday, 9 November 2010 on the Zimbabwean market.

"We are indeed on a campaign [involving] press advertisements in radio, TV, and local publications for the next three months," said Makombe-Hazangwi.

"We will be going on road shows in the city and doing in-store branding so we have a lot going on," she said.

Final phase of rebranding

Speaking at the re-branding ceremony on Tuesday, Lafarge Cement MD Jonathan Shoniwa, said the launch was "the final phase of our integration and re-branding into the big Lafarge family."

Lafarge is a building materials group based in Paris, France, with an annual turnover of over €20 billion. It presently operates in 79 countries worldwide with about 80,000 employees.

It has its footprint in 13 African countries namely South Africa, Zambia, Malawi, Tanzania, Kenya, Nigeria, Benin, Cameroon, Egypt, Morocco and Zimbabwe.

Renamed Lafarge in 2008

The Zimbabwean operation was re-named Lafarge Cement in January 2008 but the new brand was not unveiled to the market and had retained the packaging of the old brand, Circle Cement, due to the economic crisis prevailing in the country then.

The launch on Tuesday saw the entry into the market of the re-branded Lafarge products.

"Today, we complete the final phase of our re-branding from Circle Cement to Lafarge Cement by unveiling to you our new packaging, bearing the Lafarge logo.

"The new bag is a mixture of the old and the new," said Shoniwa.

"As a sign of our continuity and assurance of the best quality you have gotten used to, we have maintained the circle on the bag, albeit much smaller, signifying that your tried and tested brand, though migrating, still maintains the same high quality cement that has been so central in building many houses, buildings, dams, bridges and indeed in building cities for decades," he said.