China’s Huaxin Cement is set to increase its footprint in Africa following its recent acquisitions in East Africa (Tanzania) where it bought off debt – laden Athi River Cement – ARM unit, Maweni Limestone Limited through paying off its $116-million worth of obligations and injecting $30-million into the completion and upgrade of its production factory. The Chinese Cement giant has extended to Central Africa as it takes over control of Zambia’s largest cement name, Lafarge Plc for a 3-yard Kwacha equivalent.
According to a Stock Exchange News – SENs announcement from the local bourse the Lusaka Securities Exchange – LuSE, Lafarge through a cautionary statement on June 11, provided an update for the sale of 75% of its shares executed between majority shareholders Financiere Lafarge SAS, Pan African Cement and Huaxing Investment Company Limited where the two (2) majority shareholders have agreed to sell their stake to Huaxing for an enterprise value of $150-million (K3-billion).
Despite a challenging macroeconomic landscape posed by exchange rate depreciation and general suppressed activity in the Zambian market, Lafarge has nonetheless morphed into a regional cement exporter which has seen the company’s earnings improve. Lafarge generates $50-million from cement exports while the industry grapples with rising gypsum costs. The Zambian cement markets remain oligopolistic with a few key players that have resulted in a market share split.
Some of the major hurdles Lafarge faces include the commissioning of 2 new plants in the Democratic Republic of Congo which has had material effect on the entities sales that have halved specifically to the DRC. The Zambian cement producer has diversified its export portfolio to cover Zimbabwe, Malawi and Burundi so as it compensate for the DRC ‘market’ income stream loss.
As Africa addresses an infrastructure deficit through building of roads, bridges and other amenities, demand for cement remains high making its production lucrative business.
The Kwacha Arbitrageur