Roy Cokayne
PPC’S expansion into Africa would result in the JSE-listed cement and lime producer becoming a favourite with investors, especially in South Africa, investment banking group Imara has predicted.
In a new report, Imara said competition in the sub-Saharan African cement market was expected to intensify in the short to medium term, as supply exceeded demand, but it saw PPC’s entry into Algeria buoying the group’s fundamentals over that period.
“In the long term, though, we see demand growing ahead of planned supply and PPC realising the targeted growth in revenue and earnings,” the Botswana-listed group said.
PPC has a target of generating 40 percent of its total revenue from outside of South Africa by 2017, compared with 26 percent currently.
PPC has new projects in Zimbabwe, Rwanda, the Democratic Republic of Congo (DRC), Ethiopia and Algeria.
Imara said PPC had launched a major investment programme that should be completed by 2017 and enable it to compete better with the continental cement giants.
It referred to a recent interview with PPC International managing director Pepe Meijer, who said the company had a major appetite for west, east and north Africa.
“Certainly, in terms of our drive, we are still focused on west Africa and east Africa. Rwanda is well aligned to the eastern side of the DRC and obviously to the Burundi area. Uganda, Kenya and Tanzania – that’s an area that we are seriously considering.
“However, it’s becoming very competitive, particularly Kenya. West Africa is the area where we haven’t really set our flag down yet. Ghana is still a country to look at. Nigeria is not to be excluded. And then the surrounding countries – Niger is also getting to the front in terms of opportunities and so is Mali,” he said.
Meijer was quoted as stating that Algeria was often seen as a difficult country to enter and admitting it had been a steep learning curve for PPC. He said it had a cement shortage of about 4 million tons a year.
Meijer added that the total new capacity attributable to shareholders came to about 3.3 million tons.
“If you take that as part of the overall capacity of PPC, we believe that we’re going to be close to 40 percent” of capacity outside South Africa, he said.