Arabian Cement makes first move to expand abroad

Arabian Cement makes first move to expand abroad
Published: 04 June 2007

Arabian Cement Co, is eyeing acquisitions in Africa and the Middle East as it prepares to start construction of its first cement plant outside Saudi Arabia – a $400m project in Jordan, its chief executive said on Friday.

“We are looking at any opportunity to construct a cement factory and seize the chance by focusing on the Middle East and North Africa region along with Africa,” Arabian Cement President and CEO Muhammad Uthman said.

The company, which is investing around $900 million in projects to more than double capacity to 7Mta in the Saudi market by 2010, sees countries such as Sudan, Zimbabwe and others in East Africa as particularly attractive.

“There are shortages there, and some countries don’t have any cement factories at all,” Uthman said.

Arabian Cement may also opt for regional acquisitions in partnership with Italcementi, with which it is already an equity partner in a US$600m  plant in Labuna, in western Saudi Arabia.

The two firms are building a plant with 4Mta of capacity to be completed by 2010, Uthman said.

“They can participate with us any time as equity partners ... our agreement with them is to set up factories or to acquire existing plants in any place in the Middle East,” Uthman said.

The construction of Arabian Cement’s first project outside its home market in Jordan is expected to be completed within two years, Uthman said.

Planned jordan plant

The Jordan plant, to be located in the southern Qatrana area, will have an initial capacity of 2Mta, which could double to 4Mt if demand is sufficient. It could also export to neighbouring markets such as Iraq, Syria and the Palestinian territories, Uthman said.

“If we find a market in Iraq and Syria or Palestine in future, the Jordan plant will have the capacity, and so we are planning this for the future,” he added.

Uthman said the company’s push outside the Saudi market could help it in the event of an oversupply in the domestic market as many investors rush to build plants to the buoyant construction market.

“Our projections for the next four years show production could reach up to 60Mta for the Saudi market as a whole ... If these are right, there will be a surplus in consumption of not less than 10Mta” he said.

Arabian Cement has an advantage over other Saudi manufacturers with the proximity of its two plants, Labuna and Rabigh, to the new industrial King Abdullah Economic City close to the port city of Jeddah, where huge multi-billion infrastructure projects are underway.

The city is the single largest private investment ever made in the world’s top oil-exporting country.

Demand for cement is expected to be higher in the western part of Saudi Arabia than other parts of the kingdom.

The company’s two plants are strategically positioned due to their proximity to the Red Sea ports to export any surplus to future Sudan and East African markets.

“Our plans now are to supply Africa from the Saudi market because our plants there are close (to African markets),” Uthman said.