Portland targets slice of concrete products market

Mr Kephar Tande, the Portland MD, has set sights on the growing cement products market. Photo/FILE  NATION MEDIA GROUP

By DAVID HERBLING

In Summary

• East African Portland Cement Company (EAPCC) will next year start making cement related products such as paving blocks, culverts and concrete pipe sewers
• it will spend Sh150 million to establish a new line of precast concrete products that also includes fencing poles

East African Portland Cement Company (EAPCC) will next year start making cement related products such as paving blocks, culverts and concrete pipe sewers as it races to diversify in a market hit by a price war and stiff competition.

Portland, Kenya’s second-largest cement producer, says it will spend Sh150 million to establish a new line of precast concrete products that also includes fencing poles to feed the region’s vibrant real estate market.

This will widen its product offerings and put it in a head-to-head battle with rival Bamburi Cement, which serves the same market with its subsidiary Bamburi Special Products Ltd.

EAPCC will also buy concrete mixer trucks to pursue large-scale construction deals that require high volumes and prefer ready mix concrete to cut on time and labour cost.

Cement prices have remained little changed over the past three years due to increased production arising from expansion by existing players and entrants National Cement, makers of Simba brand, and to a larger extent Mombasa Cement who supply the Nyumba brand.

“The market for special products continues to grow given the many planned infrastructure projects in Kenya and the region,” said Kephar Tande, managing director of Portland Cement.

“We are shaping ourselves to grow market share in an increasingly competitive market which has kept cement prices relatively low.”

Construction has been one of East Africa’s fastest growing sectors over the past decade, fuelled by a burgeoning middle class. Returns on investment in the sector have outpaced those of equities and government securities.

This is fuelling demand for precast cement products, which helped Bamburi Special Products division to post a 20 per cent rise in sales to Sh1.45 billion last or 3.9 per cent of its total revenues of Sh37.4 billion.

But Bamburi is warning of tighter competition in the precast segments.

“The market in Nairobi has recorded an increase in the number of players offering precast products and the company expects downward pressure on price,” said Bamburi in a notice to shareholders. It launched the division in 1998 and its flagship products are the paving blocks and readily mixed concrete.

Portland posted a net profit of Sh1.77 billion for the year to June compared to a loss of Sh972 million in a similar period a year earlier, boosted by cost cutting and improved cement sales.

This saw the cement maker declare a dividend at Sh0.75, which has helped to lift the value of its stock 125 per cent over the past year to Sh74.50 — the highest level since September 2011.