Dangote Cement – Africa market expansion

Dangote Cement – Africa market expansion

Dangote Cement, Africa’s biggest producer of the building material, last week inaugurated its Ibese plant in southwestern Nigeria. The occasion marks a significant milestone for Nigeria, as the country moves closer to becoming a net exporting nation – something that was inconceivable even five years ago. Meanwhile, Dangote Cement continues to expand its domestic production base with major new announcements, and reasserts plans to become a major global force in the cement sector.

The company’s greenfield plant at Ibese was unveiled last Friday by Nigerian President Goodluck Jonathan. With a capacity of 6Mta from two lines, the new facility is situated just outside the commercial hub of Lagos. With Nigerian cement demand currently at 17.1Mt (up 8.2% YoY) the Ibese plant will support the company’s efforts to ensure adequate capacity to meet local demand.

Dangote Cement is currently the largest quoted company in Nigeria, accounting for about 25% of the market capitalisation on the Nigerian Stock Exchange and has plans to list on the London Stock Exchange before the end of 2012. The move is in line with the company’s plans to become a powerhouse of African cement production, as outlined in a presentation prepared for the recent Cemtech Middle East and Africa 2012 Conference. Through a number of nationwide projects, either in progress or under planning, the company is targeting a minimum total regional capacity of over 50Mt by the second half of 2014.

Nigerian expansion

Capacity at the Obajana works in Nigeria is being increased from 5Mta to 10Mta through debottlenecking and the addition of one more line. Commissioning started in late November 2011 and the plant is under trial production. The company’s Gboko cement plant has 3Mta capacity with two lines and is also undergoing a debottlenecking exercise to increase capacity to 4Mta, to be completed in 2H12. Currently, Dangote has a domestic cement capacity of 19Mta, which is set to rise to 20Mta in the second half of 2012.

Beyond these projects, contracts have been signed for three additional cement lines of 3Mta taking integrated cement manufacturing capacity to 29Mta by the second half of 2014. Plans include further increases in output at Obajana by 3Mta and doubling volumes at Ibese by 6Mt, both set for completion in the 2H14. According to DVG Edwin, group executive director of Dangote Cement, core drilling has been progressing at two more locations in Nigeria and at least one more contract for a 1.5Mta or 3Mta cement line will be awarded before the end of this year. In terms of the company’s export ambitions, civil works is set to commence on a bulk cement export terminal and engineering is scheduled to begin on a clinker export terminal, both in Lagos.

African market leader

Elsewhere in the region, integrated cement plants include 1.5Mta units in Senegal, Zambia, Tanzania Congo and Gabon, a 2.5Mta plant in Ethiopia and a 3Mta facility in South Africa. A 1Mta grinding plant is also in progress in Cameroon. The Senegal cement plant is the next to be commissioned in 2H12 while the latest updates in the Zambian local press report that work on the Masaiti District plant is progressing well and on schedule.

As well as establishing clinker and cement export terminals in Nigeria, the company is also planning a new terminal in Tanzania. It has a 1Mta import terminal in Tema, Ghana which will be followed by another one in Takoradi as well as terminals in Sierra Leone, Ivory Coast and Liberia. Furthermore, Dangote has also set its sights on Egypt as it awaits the issue of a new round of government licences. It is also considering the Mozambique and Kenyan markets and has been shortlisted for a government license in Algeria. The scale of Dangote Cement’s regional expansion is breathtaking in its ambition, and one can only be impressed by the company’s vision and commitment to the African continent.

The real challenge, however, will be in the execution of such a large-scale and complex plan, carried out in a relatively short time span and on so many fronts – not to mention the operational difficulties that are inherent in doing business in sub-Saharan Africa.