The East African Portland Cement will use its own money to finance the building of a Ksh800 million (US$10.9m) fifth clinker mill that will see its production capacity increase by nearly 100 per cent. The company, which sells its products under the brand name Blue Triangle, will also pay for the acquisition of a 49 per cent stake in the Kigali Cement Company, Rwanda. The Kigali buyout will cost East African Portland about Ksh150 million (US$2m), although the deal has yet to be sealed.
EAPC is also in the process of expanding its grinding capacity by investing in a new closed circuit cement mill, which will be commissioned within the next 18 months. This, according to company chairman Benson Ndeta, is part of the company’s regional market expansion strategy to meet the growing local and regional demand for cement.
"We are reviewing plans to modify and upgrade the clinker production plant from 1600 tonnes per day to 2100 tonnes per day. We won’t be raising any money through the capital markets. We’ll do this using our own finances," says Mr Ndeta. The new mill will boost the cement maker’s output from 600,000t to nearly a million tonnes per year. The investment is expected to grow the company’s assets by one-third.
Kenya’s Bamburi Cement holds a controlling interest in Hima Cement and has a principle interest in East African Portland and Athi River Mining, Kenya’s other cement firm. "We believe our growth catalyst will come from emerging regional markets of southern Sudan, Somalia and Rwanda. We are also confident about the future of East Africa," says Mr Ndeta.
Industry experts say demand for cement has increased following the return of peace in Sudan, the calming of conflict in the Congo and growing cement consumption by the construction industry in Kenya, Uganda, Rwanda and Madagascar. "There is a likelihood of there being a shortage of cement," says Dr Zephania Onga’ta, programmes director at the East African Centre for Economic Policy and Analysis, a regional institution on macroeconomic policy, inequality and poverty.
Buoyed by a vibrant industry that saw the demand for cement grow by about 15 per cent, Portland’s sales revenue for the year ended June 2005 grew by 29 per cent, from Ksh4.1 billion (US$55.4m) to Ksh5.3 billion (US$71.6m), the first time the company’s sales revenue hit the Ksh5 billion ($67.5m) mark.
The company, which was previously associated with loss making has seen gross profit improve by 21 per cent, from Ksh1.3 billion (US$17.5m) to Ksh1.57 billion (US$21.2m). Mr Ndeta says this was achieved in spite of increased costs of certain items such as oil, transport and raw materials. "These results, achieved during a period of hardship, have emboldened us to continue with our commitment to meet our obligations to our shareholders," he says.
Plans to acquire a 49 per cent stake in Kigali Cement Company by East African Portland Cement is part of the company’s regional market expansion strategy. "We believe our growth catalyst will come from emerging regional markets of southern Sudan, Somalia and Rwanda. We are also confident about the future of East Africa," says EAPC chairman Benson Ndeta. Kigali Cement controls five per cent of the the Rwandan cement market, with the rest being shared by the state-owned Cemerwa and Uganda’s Hima Ltd.