‘We Havn’t Raised Cement Price In Five Years’ – Hoddinott




Mr. Peter Hoddinott is the new Managing Director of Lafarge Africa PLC, a member of LafargeHolcim. He spoke to Vanguard on what led to the merger of the two companies, the opportunities for stakeholders in the new group globally and locally, among other issues.


Excerpt:

On July 15, 2015, Lafarge Group of France and Swiss Holcim announced successful completion of their $40 billion merger into a new company.  Why the merger?

Hoddinott
There are many reasons for that   but the key ones that brought these two great global companies together are that both companies have similar corporate philosophies- delighting customers; they have similar market capitalisations or market values in the stock markets; both had a long history of similar shareholders performance and,   strong balance sheet and expertise.

The merger will create platform for   growth, unrivaled excellence, and a platform for the development of employees, suppliers,   communities, and shareholders.

With the merger, what is the position of LafargeHolcim in the global cement industry?

It’s really big. We are in 90 countries and with 115 thousand employees, 350 million tons of cement capacity and the number one in aggregate and cement, the company is set to transform the global construction industry.

With the merger with Holcim, does that also translate to a change with the brands?

That is a great question. But nothing is happening right now; the brands will continue for the time being. It is something we are working on.

What advantage is the synergy going to bring to Nigeria?

The first one is development. We believe there is going to be opportunities for doing better with costs.  

A very simple example is, today, there is cement we transport from Ewekoro and Sagamu   to the Port at Calabar; that was because we were competing with Unicem but now that   with the merger it makes a lot of sense for the Calabar plants to supply those customers   and for us in the West to withdraw. This would save money and logistics costs.

The second area has to do with the high cost of our plants:   here , it is very interesting to bring together two companies like Lafarge and Holcim; there are many things that Lafarge do and has developed over the last 180 years which are very good practices but  Holcim does not do them, and so right now a team has been formed which comprised Lafarge going to study Holcim’s ex-operation  and in return, Holcim’s team is coming to study ex-Lafarge operations to study the efficiencies and output of the mills that have run down and     we expect improvement to come from that.

The third is, in Nigeria, Unicem has been buying local goods and services and also buying a few from overseas. The ex-Lafarge Africa units in Unicem, Ashaka,   Ewekoro   and   Sagamu have been doing the same thing . In most cases, the price is paid by Ewekoro and Sagamu, Unicem and Ashaka or vice-versa.

The merger will have a positive impact on the on-going consolidation of the Nigeria operations under Lafarge Africa as Unicem, AskaCem, Atlas, WAPCO operations in Ogun, as well as the Readmix sites across the country will now be integrated as a member of   LafargeHolcim in Nigeria.

We will create a stronger company that is able to make a more solid investment in Nigeria and be able to better able to assist in delivering more affordable housing as well as support for socioeconomic progress through corporate social responsibility activities.

So by bringing them together, we should be able to achieve a lot. The fourth area is that Lafarge Africa is a very large listed company with good credibility. One will expect us to be able to provide financing and all that.

Will this bring about reduction in cement price?

The price of cement today is lower than five years ago when there was importation of bulk cement for bagging. And the idea is that by increasing the production here in Nigeria we will be capable of having much more stable pricing situation on cement. That is the objective of the backward integration policy in the cement sector.

Of more importance is to reduce the cost of construction for Nigerians and for that we have been working very hard to develop solutions for people that have less resources to build their own affordable houses.

We have given access to more than six thousand families for low cost construction and we are working hard with the Ministry of Works to develop solutions which are affordable, using local materials for construction.

We are also developing durable solutions for roads construction like concrete wall because of the intricacies of the weather conditions in Nigeria. It can last 20, 30, 50 years.    

One of the issues affecting cement pricing in Nigeria is the high cost of production, and getting the cement from the plants to the markets. So, by investing in infrastructure five years ago, we have been able to reduce the logistics of transport cost and that in turns has reduced the price of cement to consumers.

How much does your Nigerian operation contribute to the group’s global sales?

Africa and Middle East represents 18 per cent of the total group and Nigeria is appropriately 1/6 of that; it is something around 3 to 3.5 per cent of the total group’s 27 billion Euro turnover in 2014.

What are the challenges you anticipate while steering the company in Nigeria?

Well, I like to count my challenges on the fingers of one hand. Unfortunately, as I come to Nigeria, I may have to use my both hands and feet as well.  

The first biggest challenge is, there is a huge move by Lafarge Africa to improve health and safety and working on the care of individuals. This is something that I have seen right from my earliest stay as an Engineer and later on working in business; and it is undeniable that we can do a lot more in the future.

The trend had been set by Guillaume Roux, the outgoing Managing Director and his team and everybody recognises we can do a lot more in care, health and safety of the people. For me that is first major challenge.

The second is the development of people. What I have seen in the very short time I have been here is incredible team that Guilluame has put together – very energetic, very intelligent, and dynamic.

The challenge in front of us is understanding and translating this into great result for individual, the company, Nigerians and shareholders and our contribution to the global business.

That is my ambition. By doing that, am very confident that the other challenge on my other hand   and feet will be dealt with because it is only through great people that you really achieve great results   against the challenges.

The third area I would mention is on cost.   I’d mention it earlier just very briefly in respect of logistics costs. Within our plants and our operations, the cost of operation is very high, especially for energy.
Cement 


There is need to use the very best practices around the world to reduce cost, typically it is around 30 to 40 percent cost.

Nigeria has huge amount of biomass and a huge of other opportunities to convert what is not currently used by the country into useful energy. This will result into a lower cost and a win-win for the community, the environment and for us.


What is the total output of your cement operations in Nigeria and future outlook?
WAPCO with three cement plants in Ogun state is doing 4.5 million metric tonnes, 1 million metric tonnes in Ashaka Cement Gombe state; 2.5 million metric tonnes in Unicem in  Cross Rivers state and a terminal in Atlas Cement Rivers state.  

In Nigeria, our plan is to double the capacities of WAPCO, Ashaka and Unicem over the next four to five years and it is critical to mention that we are completing the doubling of Unicem which should be coming on stream next year and that will add another 2.5 million tonnes; we are doing the same at AshakaCem, and that is how we get to doubling of the size.

We are having another expansion in the south west of roughly the same size.  With operations in South Africa 3.6 million metric tonnes, Lafarge Africa has a combined current cement capacity of 12 million metric tonnes, which is expected to grow to 14.5 million metric tonnes by 2016 and 17.5 million metric tonnes by 2017 and 20 million metric tonnes by 2020.

Manufacturers are bitterly complaining of the new CBN forex policy. How is it affecting your operations?

We are not importing much of gypsum and are not aware gypsum is affected by the policy. 100 percent of our raw materials are sourced locally and it is just a few gypsum and we get it from Ashaka and Unicem and we import a little   bit for Ewekoro and Unicem. That is one of the advantages of the backward integration in the country.

What is the update on your embedded power projects?

Our power plants are capable of producing more than we can use; the works are being done in phases. First to sell the excess to the communities, we are going to make it available and we want to make the power plants bigger through Wasilat, IFC and other parties to build a 220MW plants.    

We are very much on course and we hope by the fourth quarter of this year we should be able to start to sell the excess capacity to the grids.  

We have started building the equipment to be able to sell to the grids and we have started discussions with gas supply companies; we  are also progressing to the second phase which will take us couple of years before we can get the full megawatts. (Vanguard)

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