11 February 2014
South African cement maker PPC said on Monday that “advanced plans” were in place for it to enter the Algerian cement market through a partnership with Algerian private investors that would see it own a 49% stake in the Hodna Cement Company.
The transaction will be funded on a project finance basis, with 80% debt funding from local banks, the company said in a statement.
The stake, bought for an undisclosed amount, will see JSE-listed PPC assume management control of Hodna, allowing for the consolidation of the financial results of the project into the PPC group accounts.
According to PPC, Hodna will be constructing a two-million ton per annum cement plant for approximately US$350-million in the Hodna area, roughly 300 kilometres east of Algiers, and close to the university and technology-focused town of Setif.
The Johannesburg-based company is already building cement plants in Ethiopia, Rwanda and the Democratic Republic of the Congo.
“This project sees us entering yet another African country and gives us confidence that by 2017, 40% of PPC revenues will be earned outside of South Africa,” CEO Ketso Gordhan said.
“The Algerian cement market is very attractive, as consumption exceeds local production by approximately three-million tons of cement per annum. Moreover, the Algerian government has committed itself to large-scale capital spending programmes, including the US$6-billion New City Hassi Messaoud project, which will see the rollout of thousands of housing units,” he said, adding that this would “certainly boost the demand of cement in this country”.
The company said that once the feasibility study has been concluded, construction of the plant will take up to 30 months, with commissioning anticipated by the fourth quarter of 2016.
As with its other expansion projects, PPC said it would engage China’s Sinoma International Engineering as the contractor to supply and build the plant, supported by India’s Holtec Consulting.
According to PPC, cement selling prices in Algeria range between $80 and $120 per ton, with favourable production costs due to affordable petrol prices. The factory is located close to the necessary raw materials, with a well-developed road and rail network to help manage logistics costs.
“With a population of close to 40-million people, of which 74% live in urban areas, and a relatively high GDP per capita of US$5 582, Algeria still requires the construction of 225 000 housing units per year to meet demand. The national housing shortage in Algeria is estimated at 1.2-million units,” the company said.