Roy Cokayne
Pretoria Portland Cement (PPC) has acquired a 51 percent stake in Rwandan cement company Cimerwa for $69.4 million (R602m) in cash.
The acquisition is in line with PPC’s strategy to increase its revenue generation beyond South Africa and follows its $12m cash investment in July to obtain a 27 percent stake in the Habesha Cement Share Company in Ethiopia.
The Industrial Development Corporation (IDC) simultaneously invested $9m for a 20 percent equity stake in Habesha.
Paul Stuiver, PPC’s chief executive, confirmed last month that the listed cement and lime producer was pursuing four new opportunities in African countries and expressed confidence that one of them would be finalised within three months.
Cimerwa, situated in south-western Rwanda, has been the only cement producer in the country for the past 28 years. It has an annual capacity of 100 000 tons of cement.
A 600 000 tons a year expansion is under construction, with commissioning scheduled for 2014. In addition to shareholder equity contributions, Cimerwa is in the process of finalising $104m in debt financing to complete the expansion project.
Stuiver said this transaction was a further step in PPC’s commitment to invest in sub-Saharan Africa and indicated that the company was very confident about Rwanda.
“The Cimerwa plant is located in a challenging but very strategic region in east Africa, which currently lacks significant cement production capacity,” he said.
The estimated current demand for cement in Rwanda is about 350 000 tons a year but based on the positive economic outlook for Rwanda and its neighbours, regional cement demand is projected to increase to 1 million tons a year during the next decade.
Afrique Ramba, the chairman of Cimerwa, said the company was excited about the PPC relationship and the potential of Cimerwa to play an even bigger role in the future development of Rwanda.
Stuiver added that combined with PPC’s recent investment in Ethiopia, the Cimerwa transaction would increase PPC’s revenue outside of South Africa to more than 30 percent of total revenue by 2015/16.
PPC said previously 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.
Stuiver said last month that none of the four new opportunities in African countries that PPC was pursuing was more than a year away but conceded PPC did not expect to convert all of them into transactions.
PPC confirmed last month that it would embark “very soon” on the second phase development of the Habesha plant in Ethiopia to double its capacity. PPC shares fell 0.73 percent to R32.61 yesterday.