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REWIND TO 2006 and major cement production isn’t the kind of salad you want to go scratch around in. Builders were almost rioting to obtain cement. Sure, it was still a very tightly held industry. Since the late Nineties it’s been clear who owned the four slices of the cake. Enter the building slump and Sephaku Holdings [JSE:SEP] trying to establish itself as a cement supplier. Ambitious? The group is showing some crazy confidence in South Africa’s economic recovery and believes the market will again be sold out by 2014. It says an announcement will be made within the next two weeks that will show just how serious it is about the opportunities in SA’s cement sector.
Sephaku was aiming for full cement production by 2012, but the entry of its sugar daddy and holding company – Nigerian-based Dangote Industries – meant it had to make few redesigns to its plants’ layouts, says CEO Pieter Fourie. The group now expects to be up and running by first quarter 2013, although cement main man PPC said in an investor update last year it wouldn’t bother worrying about a real increase in cement capacity until 2014. It will take more than an aggressively ambitious upstart to ruffle PPC’s feathers.
Sephaku’s developments include a clinker and cement plant (the Aganang project), a cement and milling plant near Delmas and an ash plant at Eskom’s Kendal Power Station.
Dangote Industries owns 64% of the group after a R779m cash injection. And its status as the second largest producer of cement in sub-Saharan Africa (behind Lafarge) probably goes a long way in boosting Sephaku’s confidence as SA’s residential building sector continues to flail.
Fourie says you can’t ignore SA if you want to be a major player in Africa. Until Dangote made its investment, Sephaku was all about big talk. However, most players in the sector are now paying attention to its ambitions. Dangote founder Aliko Dangote is Nigeria’s wealthiest man and one of the six wealthiest individuals in Africa. So it’s safe to assume Dangote’s investments tend to turn into cold, hard cash.
The group says it’s spotted the gap in the cement supply market, as most plants are more than 35 years old, save for two new ones built by PPC, and are electricity guzzling, dirty old geezers all round. Emission standards are on their way, as well as restraints on electricity, which will place pressure on outdated plants and the kind of efficiencies that will be obtained. Sephaku says even if the market remains down, its efficiencies will provide them with an advantage over the relics of a previous era.
Then there’s the inevitable uptick in demand from the middle classes once things improve in the economy that the cement industry can look forward to.
For a while now Finweek has been speculating Sephaku could be the first in line to benefit from embattled cement group WG Wearne’s debt problems. Management was sufficiently cagey about whether it plans to buy some of Wearne’s assets. However, Fourie says the group is very interested in entering the ready-mix and aggregates market.
Analysts believe Wearne’s ready-mix division could offer Sephaku an established and national footprint and would be a smart and pain-free acquisition to make.
Either way, consensus is that whether Sephaku will be picking up some cheap assets from smaller struggling players or not, it can’t be doubted it will cause the industry’s big players to dust off the cobwebs from their own growth strategies.
Sephaku was aiming for full cement production by 2012, but the entry of its sugar daddy and holding company – Nigerian-based Dangote Industries – meant it had to make few redesigns to its plants’ layouts, says CEO Pieter Fourie. The group now expects to be up and running by first quarter 2013, although cement main man PPC said in an investor update last year it wouldn’t bother worrying about a real increase in cement capacity until 2014. It will take more than an aggressively ambitious upstart to ruffle PPC’s feathers.
Sephaku’s developments include a clinker and cement plant (the Aganang project), a cement and milling plant near Delmas and an ash plant at Eskom’s Kendal Power Station.
Dangote Industries owns 64% of the group after a R779m cash injection. And its status as the second largest producer of cement in sub-Saharan Africa (behind Lafarge) probably goes a long way in boosting Sephaku’s confidence as SA’s residential building sector continues to flail.
Fourie says you can’t ignore SA if you want to be a major player in Africa. Until Dangote made its investment, Sephaku was all about big talk. However, most players in the sector are now paying attention to its ambitions. Dangote founder Aliko Dangote is Nigeria’s wealthiest man and one of the six wealthiest individuals in Africa. So it’s safe to assume Dangote’s investments tend to turn into cold, hard cash.
The group says it’s spotted the gap in the cement supply market, as most plants are more than 35 years old, save for two new ones built by PPC, and are electricity guzzling, dirty old geezers all round. Emission standards are on their way, as well as restraints on electricity, which will place pressure on outdated plants and the kind of efficiencies that will be obtained. Sephaku says even if the market remains down, its efficiencies will provide them with an advantage over the relics of a previous era.
Then there’s the inevitable uptick in demand from the middle classes once things improve in the economy that the cement industry can look forward to.
For a while now Finweek has been speculating Sephaku could be the first in line to benefit from embattled cement group WG Wearne’s debt problems. Management was sufficiently cagey about whether it plans to buy some of Wearne’s assets. However, Fourie says the group is very interested in entering the ready-mix and aggregates market.
Analysts believe Wearne’s ready-mix division could offer Sephaku an established and national footprint and would be a smart and pain-free acquisition to make.
Either way, consensus is that whether Sephaku will be picking up some cheap assets from smaller struggling players or not, it can’t be doubted it will cause the industry’s big players to dust off the cobwebs from their own growth strategies.
