Lafarge rolls out sub-Saharan expansion plan

09.06.2014
 

Johannesburg - Lafarge, the international building materials group that last week announced the merger of its South African and Nigerian assets, has started rolling out an expansion strategy in sub-Saharan Africa that will add an additional 10 million tons of cement capacity a year in the region within the next four years.

Its South African operations will be largely unaffected by the creation of Lafarge Africa, the new entity created by the merger, which will be listed on the Nigeria Stock Exchange. It expected to have a production capacity of 12 million tons a year and last year had a combined revenue of about R13.5 billion.

 

Charlene Lamb, the country communications manager for Lafarge South Africa, said on Friday that the transaction would take place at Lafarge South Africa Holdings level and the operating companies - Lafarge Industries, Lafarge Mining and Ash Resources - were unaffected.

 

Senior management and employees in the country would also remain unaffected, she said.

 

The merger of Lafarge's assets has been interpreted by analysts as a response to Lafarge's more aggressive rival, the Lagos-based Dangote, and to consolidate Lafarge's positioning as a leading cement company.

 

Lamb confirmed that Lafarge was planning additional capacity in sub-Saharan Africa in the next four years and a project to expand its production capacity by 5.5 million tons in Nigeria had begun. It would be commissioned by 2016.

 

She said 8.5 million tons of this new capacity would come from largely brownfields projects in Nigeria, Tanzania and Zambia while a further 1.5 million tons would result from removing production bottlenecks in its operations throughout the region.

 

Lafarge, which also plans to merge with Holcim of Switzerland to create the biggest cement producer in the world, has not disclosed how much it is investing in Nigeria or other countries on the continent.

 

Lafarge has a presence in Egypt, Algeria and Morocco in north Africa and in 10 sub-Saharan countries, including Tanzania, Cameroon, Zimbabwe, Uganda, Benin, Kenya, Malawi and Zambia, as well as Nigeria and South Africa.

 

Lamb said Lafarge was also positive about the long-term prospects for the cement industry in South Africa and looked forward to the roll-out of the government infrastructure expenditure programme.

 

"We invested in a project, completed in 2009, which brought our overall cement capacity to 3.6 million tons from 2.7 million tons.

"Taking into account the prospects for growth and also new capacities in the market, we now foresee that we will have enough capacity in our main plant in the next few years," she said.

 

The South African cement industry is facing increased competition both because of new entrants to the market and existing producers increasing capacity.

 

Sephaku Cement this year became the first new entrant since 1934 and invested about R3.3bn in establishing two new plants that will have a total annual capacity of 2.2 million tons once they were fully operational.

 

Jidong Development Group of China-backed Mamba Cement has commenced construction on a R1.8bn greenfields pure cement plant with a capacity of more than 1 million tons a year at an established limestone deposit near Northam in Limpopo.

 

PPC will over the next 18 months increase its cement capacity by a further 1 million tons a year through an upgrade to its slurry kiln 8 and is targeting to generate 40 percent of its revenue from outside South Africa by 2017.

 

It has new cement plants (which) are under construction in Rwanda, the Democratic Republic of Congo, Zimbabwe and Ethiopia, with construction on a plant in Algeria expected to commence by the end of this year.

 

Shares dropped 5.71 percent to close at 118 naira (R8) in Lagos on Friday