$21m Ethiopia deal ‘a first’ for PPC – Independent Online

Roy Cokayne

Pretoria Portland Cement (PPC) and the Industrial Development Corporation (IDC) have jointly acquired a 47 percent stake in the Habesha Cement Share Company in Ethiopia for $21 million (R178m).

The JSE-listed cement producer has invested $12m cash to obtain a 27 percent stake in Habesha Cement.

The acquisition, PPC’s first investment in the Ethiopian and east African cement market, is in line with and will provide impetus to its stated strategy to expand into new markets in sub-Saharan Africa.

The IDC will simultaneously invest $9m for a 20 percent equity stake.

Habesha Cement’s new $130m plant, 35km north-west of Addis Ababa, is in the early stages of construction. It will have an annual capacity of 1.4 million tons to supply the growing Ethiopian cement market, with production planned to commence during the first half of 2014.

In addition to the equity investments by PPC and the IDC, Habesha Cement has secured $86m in debt financing from the Development Bank of Ethiopia.

The plant’s future development plan includes an option to double the capacity to 2.8 million tons a year.

Paul Stuiver, PPC’s chief executive, said yesterday that the group planned to grow its revenue earned outside of South Africa to between 40 percent and 50 percent of total revenue during the next few years.

“We look forward to a growing contribution and partnership with Habesha in the years ahead,” he said.

Kevin Odendaal, PPC’s executive for strategy and corporate communication, said it was estimated that the plant, once in production, would increase PPC’s annual offshore revenue by 25 percent or R250m, based on the PPC’s current annual total revenue of R1bn.

Odendaal said the idea was that most of the cement produced during the first phase would be for the Ethiopian domestic market. The plant was positioned close to Addis Ababa and the road to South Sudan and there would be an opportunity to export if cement demand in that area picked up.

Odendaal said PPC would supply expertise to the plant in both its construction and operational phase and the PPC Academy would train personnel in mining and cement making. Typically, a cement plant like this in its first phase of production needed about 250 workers.

Odendaal confirmed there were other opportunities for PPC in terms of its African expansion strategy but none that he could comment on now and there were no imminent announcements related to these opportunities.

Habesha Cement is a first of its kind cement share company in Ethiopia, with more than 16 000 local shareholders.

Stuiver was impressed during his visits to Ethiopia by the professionalism of its management and advisers.

“They have significant experience in the cement industry and we have already built great relationships. The country’s current investment plans, combined with one of the fastest-growing cement demands in Africa, makes us extremely confident about the sustainability and growth of this investment,” he said.

Ethiopia has a population of about 85 million, is one of the most populous countries in Africa and has one of the fastest-growing economies on the continent. Infrastructure development is high on the country’s agenda and the government has embarked on a significant housing reform programme.

PPC is the leading supplier of cement in southern Africa with eight cement manufacturing facilities and three milling depots in South Africa, Botswana and Zimbabwe. It has a total annual capacity of 8 million tons of cement.

PPC shares rose 0.41 percent to close at R24.70 yesterday.