Eurocement to invest US$300m in new plant

Eurocement to invest US$300m in new plant
Published: 03 February 2006

Eurocement Group has announced an intention to build a new plant worth US$300m in the Ryazan Region. Experts presumed that the company has decided to strengthen its positions in the Volga region capitalising on the present rather disjointed status of competitor plants in this region.

Eurocement’s, Filaret Galchev and President of Eurocement Mikhail Skorokhod, held negotiations with Governor of the Ryazan Region Grigory Shpak with a company spokesman saying: "Negotiations have been successful and an agreement on construction of the plant is being prepared for signing."

The investment program of Eurocement Group now includes modernisation of all plants of the company, as well as construction of two new plants with aggregate capacity of 3Mta in the Lipetsk and Voronezh regions. Investments in the projects now amount to US$560m.

According to the Federal Statistical Service, by 2008, the need of the Russian market for cement will reach 71.7Mt and aggregate cement production capacity will reach 69.2Mt.

Vladimir Andrienko, Managing Director of the investment fund Russia Partners (minority shareholder of Eurocement), says that Eurocement has chosen a successful site for construction of the plant, "The new facility will be built on the site of the existing Krasny Tsementnik plant, there is a raw materials base and all communications there." Andrienko adds that it is not clear how the investment will be funded, presumably from profits.

Eurocement already has production facilities in the Ryazan Region. The company owns Mikhailovskcement with capacity of 1.9Mt. Analyst Alexander Voronin, of Direct Investments company, presumes that Galchev has decided to strengthen his positions in the Volga region using the problems of the local market leader Mordovcement, "Recently the prosecutor’s office of Mordovia invalidated the deal for acquisition of the Sengileevsky cement plant by Mordovcement. The Sengileevsky plant occupies a significant share in the overall output of Mordovcement." Analyst Maxim Ivanov, of CenterInvest, agrees with him. Ivanov says, "Production in the Ryazan Region becomes a key for meeting of needs of the neighboring regions. There is a need to increase production capacity in the region."