Nigeria overtakes South Africa as biggest cement manufacturer in SSA
Nigeria has beaten South Africa as the biggest cement manufacturer in sub-Saharan Africa (SSA), making it the third-largest in the broader Middle East, only lagging behind Egypt and Saudi Arabia, a 2013 research by Renaissance Capital has revealed.
Nigeria's current industry capacity surpassed the 20mn tpa mark, reaching 28mnt, well above South Africa's production of 18.3 metric tonnes per annum (tpa).
The research also shows that cement consumption has remained strong in the country, growing from 14.8mnt in 2009 to18.3mnt in 2012. The momentum has been maintained into 2013 despite the negative impact of flooding that occurred in late 2012.
This strong performance has also been mirrored in the cement companies' share prices, with combined returns from a portfolio of the four listed stocks (Dangote Cement, Lafarge WAPCO, Ashaka, and Cement Company of Northern Nigeria (CCNN), returning 50.2 percent ytd, vs. the 36.6 percent gain in the NSE All Share Index.
This milestone is attributed to the convivial environment in which cement manufacturers operate, as well as increased economic activities that have characterised the country's market in recent times.
"The Nigerian cement market has changed significantly, driven by favourable government regulation, rising demand, and increased investment on the back of aggressive economic growth," said Renaissance Capital research team led by David Nangle.
The implementation of the Backward Integration Policy (BIP) in the country has also seen the cement industry's production base grow by over 95 percent between 2005 and 2012. This increase was led by Dangote Cement (from 8.00mnt to 19.25mnt), followed by Lafarge WAPCO (from 2.0mnt to 4.5mnt).
RenCap said this had encouraged on-going expansion projects by a number of players, possible increase in capacity to 50 mnt pa by 2017, and opening vistas of opportunities for investors.
"We remain positive on the outlook for the sector over the short-to-medium term as additional capacity continues to come online, and cement demand responds to the growing availability of product. Over the medium term we continue to see opportunities for those players who are able to invest in additional capacity and grow distribution networks in the country," said the research.
The research also identified product quality as a value driver of the industry. Growing need for housing and infrastructure such as roads was further identified as a demand driver.
"Previously, all domestic manufacturers primarily offered cement type CEM II 32.5 (general-purpose cement primarily used in residential and DIY applications); some are now offering CEM I 42.5 (commonly used in highly specialised applications such as high-rise buildings, etc) in a bid to carve out a premium niche in the market.
"We are optimistic about the sustainability of Nigerian cement demand in the long term, given the quickened pace of socio-economic development currently being experienced in the country. This is also backed by the strong potential presented by the poor state of the country's housing and road infrastructure," the RenCap research said.
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