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TimePosted 10/12/2018 12:01:08

Raysut Cement targets international expansion

This week Oman's Raysut Cement Co announced that it is planning to expand its portfolio by entering the Indian cement markets of Gujarat and Chhattisgarh, as well as targeting a 70 per cent stake in the distressed Kenyan producer ARM Cement, which is up for sale with debts of US$140m.

The investments are all part of Raysut Cement's medium-term plan to substantially raise cement capacity from 6Mta to 20Mta by 2022. The acquisitions in India will represent an initial total investment of US$200m, as Raysut Cement acquires controlling stakes of around 75 per cent in two Indian cement producers with current cement capacities of 1.2Mta in 1Q19. By 2022, Raysut Cement aims to have invested as much as US$700m in India, including capacity expansions in the region of 5Mta at the two Indian plants.

"We have been focussing on high-growth markets and we are seeing that India has a significant potential in the next 20 years. We would also like to participate in the country's infrastructure development and economic growth," said Joey Ghose, Raysut Cement's CEO.

The target companies in India have not yet been identified, although Shree Digvijay Cement Co Ltd's 1.2Mta integrated plant at Digvijaygram, Gujarat is a likely contender. Votorantim announced in November 2018 that it had sold its 75 per cent share in the company to private equity firm True North. It is less clear where Raysut Cement has an option to purchase in Chhattisgarh province.

Currently, Raysut Cement is the largest limestone and gypsum supplier to western India and it has recently begun supplying gypsum to the southern markets of India.

Building local markets overseas
Raysut Cement is also understood to be in discussions to acquire African capacity in Uganda and Djibouti as well as establishing a greenfield 1Mta plant in Georgia, a new plant in Berbera, Somalia, and the establishment of Al Wusta Cement Company in Al Duqm with Oman Cement. Along with its Pioneer Cement subsidiary in UAE, Raysut Cement has a history of not being put off by entering highly-competitive markets.

The reasons behind the ambitious internationalisation strategy can be understood by the tough challenge that the company already has in growing its export business. Yemen has traditionally provided 50 per cent of the group's export sales and Pioneer Cement, UAE, accounts for 30 per cent of group revenues. In 2017, Raysut Cement's export sales fell by 28.7 per cent YoY to 0.67Mt from 0.95Mt, reports U-Capital. By setting down permanent roots in India and Africa, Raysut Cement can focus on distribution for local markets.

Domestic market challenges
The Oman Cement market has been weak with Raysut Cement reporting 9M18 revenues of US$166.5m, down 17 per cent on the same period in 2017. The company has introduced waste tyre burning to reduce fuel costs and Sinoma has been contracted to build a 9MW waste heat recovery (WHR) plant to lower power costs by 30 per cent.

Furthermore, the entry of Suhar Cement is expected to impact on the local industry from 2019, when the Fujairah Cement-backed grinding project comes on-stream in the special Economic Zone of Duqm. Al Anwar Holdings has also announced its intention to build a 0.6Mta grinding plant in Duqm.

Raysut and Oman Cement's own Al Wusta Cement project in Duqm has been slow to be implemented with total project investment reported to be US$85m and procurement talks only just getting underway for the 5000tpd plant, which is scheduled to be completed in 4Q20. 

The project could face further delays with the Sultanate’s policy of 'Omanisation' to create jobs for the resident population, while some 2m immigrants have been subject to a visa ban, which will affect construction workers for a six-month period up to July 2019.


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