East Africa: Cement Firms Record Steady Decline in Fortunes

Cement manufacturers in East Africa are staring at dwindling sales, rising operational costs and plummeting incomes this year, industry data shows.

In what has now become predictable, Kenya's East African Portland Cement has yet again issued a profit warning, preparing shareholders for another year of loss-making.

The company, which is located outside the Kenyan capital Nairobi, said preliminary evaluation of the unaudited results for the period to December 31, 2018 had showed that full-year earnings would fall by more than 25 per cent, compared with the year ended June 30, 2018.

"The expected decrease is mainly attributable to increased input costs, a sluggish market as well as production challenges arising from a tight working capital position that affected the company's ability to effectively serve its customers," the board said in a statement.

Cheaper imports

Portland joins Bamburi, majority owned by the French giant Lafarge, which issued a profit warning in December, informing shareholders and potential investors that 2018 full-year earnings would decline by more than 25 per cent. The audited results are expected later this month.

Africa's largest cement manufacturer, Dangote, said its Pan-African operations have produced mixed fortunes having posted flat sales growth in 2018 led by Tanzania and Ethiopia which reported a decrease in sales.

Dangote's cement sales volumes in Tanzania declined from 757,000 tonnes in 2017 to 625,000 tonnes in 2018 only a few years after it entered the East African market with high level optimism.

The decline was attributed to long delays in installation of gas turbines at its Mtwara plant, that forced Dangote to reduce production to avoid substantial losses arising from use of expensive diesel generators to power the plant.

Tanzanian government had at the time imposed a ban on coal imports, demanding that local manufacturers procure locally-produced coal to power their plants.

Cement manufacturers are also being forced to battle for market share with cheaper imports from China, India and Pakistan.

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