Bamburi bets on niche products to protect market share

Kenya: Bamburi will defend its market share from intensifying competition through unveiling of niche products such as specialty cement, its new boss Frenchman Bruno Pescheux has said.

Mr Bruno was seconded to the leadership of Bamburi in July this year, at a time when its dominance was facing the stiffest competition yet from newer players.

With Bamburi’s share estimated at just about 50 per cent now, the new boss projects that there will be no further losses, adding that the firm will start producing niche products such as specialty cement used in road construction. “We will in the next months be producing new products for very specific functions,” said Bruno in an interview with The Standard yesterday.

Sectoral realignments

He replaced Egyptian Hussein Mansi, who has now moved to his home country to head Lafarge operations in the Cairo office. It is during Mansi’s five-and-a-half year tenure that kicked off in 2009 that the Kenyan cement market reported the biggest realignments yet. “It is not enough to have a one size fits all product in such a competitive market.”

Even with the broadest range of products in the market so far, Bamburi has had to contend with a smaller fraction of the market, even though its sales in absolute numbers grew, albeit marginally.

In the half-year results for the period ending June, Bamburi’s reported a nine per cent rise in revenue to Sh17.2 billion against a nearly 30 per cent drop in net profits to Sh1.6 billion. Bruno attributes the drop in profitability to the company having to soak up the ‘additional operating costs’ in the face of rising competition.

Kenya is still a profitable market for Lafarge, Bamburi’s parent company, but the focus moving forward will be on suppressing production costs, the managing director said.

New cement companies that have started operations over the past five years are selling their cement at a Sh100 discount thanks to the benefit of newer technologies employed. This has given rise to significant savings in energy needs and costs.

Globally, energy costs make up an average of 30 per cent of production expenses. In Kenya however, the proportion of energy costs could be higher given that the cost of electricity is among the highest in the world.