Foreigners seek share of Kenya cement business

16 January 2019

Global cement giants have set their sights on Kenya as they seek quick acquisitions of troubled local manufacturers in a move expected to shake up East Africa’s cement market.

Nigeria-based cement maker Dangote and Omani corporation Raysut Cement are this month expected to finalise their bids for struggling ARM Cement as part of their strategy to expand into Kenya. In November, Dangote Cement disclosed its intentions to buy a regional cement manufacturer before June 2019, effectively giving the Nigerian conglomerate control over East Africa’s cement market.

“We plan to list our business at the London Stock Exchange. In preparation, we are consolidating our cement business. This has seen us increase capacity in various markets and make several acquisitions ahead of the IPO. “There is also a cement company with operations in Tanzania, Kenya and Rwanda and we hope to take them over,” Dangote Group chairman Aliko Dangote told Bloomberg.

The description of the target aptly fits ARM Cement. If successful, the buyout will see Dangote abandon its initial plan to build two factories in Rwanda, three in Tanzania, one in Burundi, and another in Jinja Uganda. Dangote, which has about a 45% market share in sub-Saharan Africa with an annual production capacity of 45 million tonnes, has long held interest in venturing into Kenya – with plans underway to build two cement factories by 2021.

The company will, however, compete with Raysut Cement, East Africa’s largest supplier of clinker, which has put forward a Sh10.2 billion bid for ARM Cement – once Kenya’s second largest cement maker after Bamburi.

The bid, if successful, will help the Omani company to become a manufacturer of cement in Kenya, a shift from its present status of being a supplier of clinker to local cement makers. The investment is part of Raysut’s plan to more than triple its overall production capacity to 20 million tonnes per annum, from the current six million tonnes per annum. Other multinationals reportedly seeking to acquire ARM include LafargeHolcim, Heidelberg Cement AG, and Titan Cement Co. SA of Greece.

ARM, which was in August placed under the administration of PwC after failing to find an investor to help it manage debts of 14.4 billion shillings, has operations in Kenya, Rwanda, and Tanzania – making it attractive to investors seeking to expand into the region. The planned acquisitions come at a time when Kenyan cement manufacturers are going through tough times, with some falling into money losing territory as they face stiff competition from cheap imports, high production costs, as well as slowing demand from the regional construction industry.

Official data shows that the amount of cement consumed in the country fell by 113,096 metric tonnes to 4.13 million metric tonnes in the first nine months of last year, compared to 4.24 million metric tonnes in the same period in 2017.

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