ARM Cement Chief Exec talks growth expectations and challenges

Kenya’s Athi River Mining Cement (ARM Cement) has said it expects earnings to increase thanks to the additional capacity from the new 750 000 tpa cement plant in Tanzania.

“This year we are looking at increasing our top line and bottom line by 35% over last year and next year we expect a similar growth,” Chief Executive Pradeep Paunrana told Reuters this week. Last year’s pretax profit rose 31% to US$20.29 million.

Cement demand in East Africa

East Africa is attracting a lot of investment in the cement industry, as the market continues to improve on the back of large government infrastructure projects. Dangote Cement has announced plans to establish a US$400 million plant in Kenya, while in Tanzania a new plant capable of producing 1.2 million tpa of clinker is due to start production next year. At present, annual cement consumption stands at 4.7 million t in Kenya and 3.2 million t in Tanzania.

ARM Cement is Kenya’s second largest cement company, with 1 million t of cement capacity in the country in addition to its 0.75 million t plant in Tanzania. The plant will next turn its attention to Rwanda, where it hopes to double its share to about one third of the 0.45 million tpa market through investments worth US$15 – 20 million.

Challenges

Increased competition, both domestic and foreign, continues to be a challenge for the cement industry in East Africa. Low prices hurt margins, and companies have to focus on cost control. The unreliable power grid is also an issue, causing disruptions to production that, again, hurt profitability.

Adapted from Reuters article by Katherine Guenioui