You are here  » Home   » Business

Cement makers struggle as mega projects dry up

By Otiato Guguyu | Published Sat, December 2nd 2017 at 00:00, Updated December 1st 2017 at 23:13 GMT +3
Bamburi Cement Factory

In summary

  • Bamburi cement said it expects its 2017 full year earnings to decrease by more than a quarter
  • Completion of the Mombasa-Nairobi SGR and the suspension of the Nairobi-Naivasha segment has had a big role in the contraction of the construction industry

Kenya’s largest cement manufacturer Bamburi has issued a profit warning as its  Kasese plant manager Daniel Pettersson quit.

The cement firm, which is partly owned by the French Lafarge Group, said that 2017 full year earnings will decrease by more than a quarter.

The firm, which made a Sh5.8 billion net profit in 2016, attributed the expected drop on contraction in the real estate sector due to low credit growth as well as low export volumes.

“The expected decrease is mainly attributed to weaker performance in the business in Kenya resulting from contraction of the cement market partly due to poor private sector credit growth, drought conditions together with pre and post-election periods,” the company said in a statement Friday.

Bamburi said that Mr Pettersson had left the wholly owned subsidiary Hima Cement Limited (in Uganda), which he has headed since 2013, to pursue interests outside the group.

Bamburi, which made billions supplying cement to the Standard Gauge Railway project, is a victim of the slow activity in mega infrastructure projects. The firm is 58.6 per cent controlled by France’s conglomerate Larfage.

Plant shut downs

The completion of Mombasa-Nairobi SGR and suspension of the Nairobi-Naivasha segment has played a big role in the contraction of the construction industry.

Low demand and sinking orders from such projects has wiped off margins for local players with ARM Cement taking the biggest hit.

Athi River Mining dipped into a Sh1.4 billion after tax loss in the six months to June this year compared to Sh266 million losses in 2016 as Kenyan unit saw plant shut downs.

Volumes in the export market, especially to Tanzania, have also been affected by strict regulations. Tanzania issued restrictions on coal imports to its Tanga plant. ARM has not been able attain sufficient capacity utilisation from the Tanga clinker plant due to electricity and coal supply problems.

Generally, cement prices are retailing at a 10-year low following cheap imports from China, India and Pakistan and uptick in production from local producers. A 50-kg bag of cement in Nairobi is being sold by dealers at an average of Sh600 from Sh750 in 2008 and 2009 with some brands going for as low as Sh530.

East African Portland Cement, which has been in the red for a couple of years, had to revise the retail price of Blue Triangle from Sh600 to Sh540 after the company slashed its ex-factory price by 10 per cent.

Nigeria’s Aliko Dangote is also targeting to undercut the Kenyan market with initial imports of cement from his plant in Ethiopia as it prepares to establish a local manufacturing plant.

The downturn in the cement industry signals the end of a boom of the real estate sector which accounts for over five per cent of Kenya’s Gross Domestic Product.

[email protected]


Would you like to get published on Standard Media websites? You can now email us breaking news, story ideas, human interest articles or interesting videos on: [email protected]

RECOMMENDED