Kenya’s East Africa Portland Cement (EAPCC) has severed a multimillion shilling clinker supply contract with Bamburi, ending a four-year deal that had raised questions over potential conflict of interest due to common shareholding and market rivalry of the two listed companies.
The cement producer has now signed a new supply agreement with competitor National Cement, representing a cost saving of KES720/t. “We found out that other players were offering lower prices which means we could leverage on lower clinker costs to improve our profitability,” said EAPCC MD Kephar Tande.
EAPCC’s decision to single source the supply of clinker from Bamburi raised eyebrows when it was signed in 2007. Bamburi, through its parent company Lafarge, controls 41.7 % of EAPCC.
Officials of Bamburi said that the supply deal with EAPCC was on a need basis, where the clinker would be delivered after payment has been received, claiming that there was no formal contract,according to reports in Business Daily Africa.
National Cement MD Raval Narendra said EAPCC was now their biggest client. “We are the biggest clinker importers in the region now because we have established contacts in Europe and the Emirates, we signed a supply contract with EAPCC for 150,000mt for this year,” said Mr Narendra.
EAPCC also plans to set up a clinker plant in Kitui next year after it acquires a limestone-rich parcel of land in the medium term to ensure self-sufficiency. Increased competition has pushed EAPCC, which is estimated to control about 25 per cent of the local market, to seek production efficiency.