Focus on Cement industry continues, CFC have given the following report on it
National Cement (NC) in Kenya which is a subsidiary of Devki Group (manufactures steel building products, roofing sheets and cement), last week announced plans to up its grinding capacity from 400,000mtpa (million tonnes per annum) to 2.5mtpa at a cost of Ksh13bn/$146m by the end of 2012. By our estimates, this would make NC, which only started operations in Q4:10, the second largest producer in the region after Bamburi Cement – 3.35mtpa (includes Hima Cement wholly owned subsidiary in Uganda). In our view, NC’s planned new capacity, in addition to competitors’ plans to increase their capacity, is likely to further constrain capacity utilization of the sector from 60% in 2010 to levels of c.50% in the next three years - especially since we forecast installed capacity to grow at CAGR 24% in East Africa during 2011E-2013E versus forecast cement demand growth of CAGR 15% for the same period. In addition, we believe the industry is likely to face increased pressure on pricing as competition intensifies and manufacturers strive to optimize utilization levels. Athi River Mining is planning to increase its grinding capacity in Tanzania by 1.5mtpa by 2012. Mombasa Cement, a new entrant, earlier this year indicated plans to increase its capacity to 1.4mpta.