CORPORATE NEWS
Dangote Cement now delays Kenya entry to 2021
MONDAY, MARCH 13, 2017 11:37
BY VICTOR JUMA
Nigeria’s Dangote Cement has pushed back its entry into Kenya to 2021, having earlier planned to build a cement factory in the local market next year.
The conglomerate, owned by Africa’s richest man Aliko Dangote, did not give the reasons for the change of plans in its latest annual report which disclosed the delayed entry.
Dangote has also reviewed its Kenyan manufacturing plan, noting that it will build two plants instead of one but will maintain the total capacity at three million tonnes of cement per annum.
“Kenya is high on our priorities and we plan to build two plants of 1.5 million tonnes per annum each, near Nairobi and Mombasa, to serve the local market. We hope to be operational in Kenya by 2020/21,” the company said in the report.
Dangote is widely known for using lower pricing to gain market share in new markets and its delayed entry will give some reprieve to existing players in a market that is already witnessing stiff competition.
Kenya’s largest cement manufacturer Bamburi reported a 2.9 per cent sales decline in the year ended December, attributing it to increased competition.
“Group turnover for the year was slightly below 2015 at Sh38 billion on the backdrop of a competitive operating environment,” Bamburi said in a statement.
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“Overall, there was a marginal reduction in volumes into inland Africa export markets and intense competition particularly in the individual home builder segment impacting prices in
Imports from Ethiopia
Ahead of the plants’ construction, Dangote is planning on expanding cement exports to Kenya from its Ethiopian plant.
“Furthermore, we believe there is some potential to export cement from Ethiopia to countries such as Somalia and South Sudan, despite the distances involved. We have also experienced some interest from cement importers in Kenya,” the company said.
The multinational last year announced it had started exporting the commodity to the northern part of Kenya from Ethiopia at a price of about Sh7,500 which is more than 20 per cent cheaper than locally manufactured brands.
Dangote, which plans to topple Bamburi’s parent firm LafargeHolcim as the largest producer of cement in Africa, rides on economies of scale to set lower prices that in turn grows its market share.
Its plant in Ethiopia has an annual production capacity of 2.5 million tonnes.
The Nigerian firm said it gained a 23 per cent market share in Tanzania last year when it completed its factory –with a capacity of three million tonnes per annum — in Mtwara about 400 kilometres from Dar es Salaam.
Cut prices
The company cut prices in Tanzania to rapidly gain market share at the expense of rivals, including Kenyan multinationals with a presence in that market.
Dangote priced its cement in Tanzania at about Sh8,100 per tonne last year, undercutting its competitors by more than 20 per cent.
The company is expected to replicate its lower-pricing strategy in Kenya when it starts local production.
“The rapid success of plants that we have opened beyond Nigeria is testament to our strategy of competing on costs, service and selling higher-quality cement at competitive prices for local needs,” Dangote said in the report.
It already has a licence to prospect for limestone in Kitui and has incorporated two majority-owned subsidiaries to house its local limestone mining and cement production operations.
It has a 90 per cent stake in Dangote Cement Kenya Limited and a similar stake in Dangote Quarries Kenya Limited.
vjuma@ke.nationmedia.com
Dangote Cement now delays Kenya entry to 2021
