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Cement marker grows: Lafarge plans new Nigerian expansion

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IMAGE: Lafarge Cement Plant »



Lafarge Cement Wapco Nigeria Plc is planning new cement capacity expansion in Nigeria as it moves to satisfy growing demand in the cement sector.

The country’s cement market which grew at a 16 percent clip in the first quarter of 2013 has the potential to hit 50 million mtpa in a couple of years, according to Joseph Hudson, MD/CEO Lafarge cement Wapco, Nigeria.

“Absolutely we will be increasing our production capacity and it will happen quite soon,” Hudson says in an interview, last week at Lafarge headquarters in Lagos.

“When you look at this market, with the demographic growth, we think potentially this is a 50 m ton market.”

Nigeria’s cement market has current installed production capacity of about 30 million metric tons per annum (mtpa), while domestic demand totaled 20m mtpa at the end of 2012.

Lafarge has current production capacity of 8.5 m mtpa, and is the second largest cement manufacturer in Nigeria, behind industry giant Dangote Cement.

The announcement of the new cement production capacity “will be made soon”, according to Hudson.

Cement consumption per capita is low in the country of 170 million people, at 110 kilograms per capita, compared to double that in South Africa and an average of 300 kilograms per capita in North Africa.

Demand for cement in Nigeria is however on the increase amid rising domestic demand, disposable income and increased government spending on infrastructure and capital projects.

Nigeria’s capital budget rose by 17.8 percent in 2012, to N1.32 trillion from N1.12 trillion in 2011.

Income per head is expected to hit $1,731 in 2013, up 7.1 percent from the 2011 level of $1,615, according to data from investment bank, Renaissance Capital.

The Nigerian economy grew by 6.58 percent in 2012.The economy will probably expand 6.8 percent this year, the National Bureau of Statistics (NBS) said in February.

Lafarge which has a global research and development (R/D), budget of $150 million, is leveraging on its international heritage to provide new innovation and premium products to the Nigerian market, Hudson said.

It is also partnering with the relevant authorities at the State and Federal level to combat the menace of building collapse in Nigeria.

Lafarge Wapco reported a 10 percent year on year (yoy) rise in second quarter (Q2) 2013 revenues to N26 billion. Net income rose to N8.5billion, 65.7 percent higher than in the earlier period of 2012.

The profit margin of 33 percent for the period was, much higher than the 5 yr average of 16 percent.

The prognosis looks good for Nigerian cement manufacturers, according to some analysts.

“The Cement Manufacturers Association of Nigeria’s policy push with FGN to patronize cement roads would broaden avenues for cement usage domestically. Hence, we maintain our optimistic view on the industry,” said Oyindamola Olanrewaju ARM research analyst, in a note released in July.

Lafarge Wapco’s share price has gained by 74 percent in the past year, compared with a 39 percent gain in the Nigerian Stock Exchange All Share Index (NGEASI).

Article Credit: Business Day Newspaper

Updated 5 Years ago

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