South Africa’s cement manufacturing giant PPC is set to enter the Algerian market through a Greenfield project in a development that keeps the company on course to meet its 2017 target.
PPC aims to generate 40% of its revenue outside South Africa by 2017 and has initiated projects in Rwanda, DRC and Ethiopia.
The company is now venturing into Algeria. In an announcement released today the company said plans are in place to enter the Algerian cement market through a partnership with Algerian private sector investors in Hodna Cement Company. “Our partners have experience in construction and related sectors, and fulfil one of PPC’s key requirements – to partner with local shareholders when investing in a new country.”
Hodna will be constructing a 2 million ton per annum plant for approximately US$350 million in the Hodna area, roughly 300km east of Algiers and close to the university and technology-focused town of Setif.
PPC will acquire a 49% stake of Hodna and assume management control which allows for the consolidation of the financial results of this project into the PPC group accounts. The transaction will be funded on a project finance basis, with 80% debt funding from local Algerian banks.
“The Algerian cement market is very attractive as consumption
exceeds local production by approximately 3 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. This will certainly boost the demand of cement in this country,” said Ketso Gordhan, CEO of PPC.
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 intends to engage China’s Sinoma International Engineering as the contractor that will supply and build the plant; supported by India’s Holtec Consulting, specialists in project management.
Cement selling prices in Algeria range between US$80 and US$120 per ton with favourable costs of production due to affordable gas prices. The factory site is well located with the necessary raw materials in close proximity. The well-developed road and rail network also assist in managing the cost of logistics.
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$5582, 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.
Ketso Gordhan, added “We are already building cement plants in three countries; 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.”