8 May 2017

Tanzania: Tanga Cement Upbeat About Growth Prospects

Tanga Cement is confident that market challenges that trimmed profit last year are coming to an end thanks to an economy which continues to grow strongly and launching of mega-infrastructure projects.

The Chairman of the Board of Directors, Lawrence Masha told the 'Daily News' they are optimistic that cement sales would rebound after a long period of slowdown caused by intense competition following the entry of new players in the industry.

"The fact of the matter is that new players are entering the cement industry has increased but the beauty about it is that this is a growing economy... we should be able to sell our cement. It is a question of knowing where you market your cement.

Where you sell," he told the 'Daily News' on the sidelines of the Annual General Meeting. He said they were confident that the expected boost in cement demand would take care of the challenges of excess supply which have been compounded by the entry of new players in the industry.

Strong growth sustained for over a decade and commissioning of mega-infrastructure projects have made Tanzania's cement industry attractive despite challenges of excess supply which have forced prices down.

The industry has been dominated for years by three major producers, Tanzania Portland Cement, owned by a subsidiary of Germany's Heidelberg Cement AG, Tanga Cement, majority owned by Afrisam Mauritius Investment Holdings Limited and Mbeya Cement, owned by France's Lafarge SA.

A team of new players -Arthi Rhino Cement, Camel Cement, Lake Cement, Lee Building Materials and Dangote Cement- have enhanced competition in the market. However it is the coming of Dangote Cement that changed the landscape significantly after it slashed cement prices up to 10,000/- per 50kg bag in 2015 being only months after it started operations. Other players had to follow suit by lowering prices of their products and begin sales promotion campaigns so as to survive in the market.

Another big player, is the Chinese controlled Sinoma and Hengya Cement (T) Ltd which will build a US$1billion cement manufacturing plant in the coastal city of Tanga to focus on exports. About 70 per cent of cement produced at the plant will be exported to local countries including Somalia, Kenya, Mozambique, Sudan, the Democratic Republic of Congo and Uganda.

However, Mr Masha said they were undaunted with the influx of new players in the market adding the focus would not be to compete with other producers but improve quality and market strategies to gain more their market share, he said. It is going to be very difficult for Tanga Cement to try to compete with Dangote Cement in Lindi. It'll be sheer madness just as it will be sheer madness for Dangote Cement to try to compete with Tanga Cement in Tanga," he said.

Mr Masha said they were undaunted with intense competition in the market that saw producers forced to drop prices in the wake of declining demand and excess supply. Tanga Cement banked on high quality of their brand when it comes to competition with other producers, he said adding they have a cement brand that enjoys high reputation in the market and gives them an edge over others.

"With additional players in the market, we must sit back and look at our strength. We are very lucky that in the sense that Simba cement is a respected brand in the market... so that has given us advantage... that is where our advantage lies," he said.

Tanga Cement's net profit dropped by half to 4.2bn/- last year from 8.2bn/- in 2015, according to financial statement for the year ending 31st December 2016. Its revenue dropped by 20 per cent year-on-year to US$75m in 2016 from US$94m in 2015 due to competition and lower government spending on infrastructure.

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