PPC Enters Algerian Cement Market by Purchasing Stake in Hodna

PPC Ltd. (PPC), South Africa’s largest cement maker, agreed to buy a 49 percent stake in Algeria’s Hodna Cement Co., giving it management control of a new plant and entry to a country where consumption exceeds production.

PPC is expanding in Africa through acquisitions to offset competition in its domestic market. The Johannesburg-based company will have new plants operating in the Democratic Republic of Congo, Rwanda and Ethiopia by the end of 2015, boosting annual capacity by more than a third to as much as 11 million metric tons.

“This project sees us entering yet another African country and gives us confidence that by 2017, 40 percent of PPC revenues will be earned outside of South Africa,” Chief Executive Officer Ketso Gordhan said in a statement today. “The Algerian government has committed itself to large-scale capital spending programs, including the $6 billion New City Hassi Messaoud project, which will see the rollout of thousands of housing units.”

PPC didn’t disclose the price of the Hodna stake.

Hodna is building a 2 million-ton per year plant about 300 kilometers (186 miles) east of the capital Algiers. The facility will cost about $350 million and the PPC purchase will be 80 percent funded with debt from Algerian banks, PPC said. The national housing shortage in Algeria is estimated to be 1.2 million units, according to PPC.

PPC shares increased 0.8 percent to 29.55 rand as of 10:24 a.m. in Johannesburg, paring this year’s decline to 5.9 percent.

The plant is expected to be commissioned in the fourth quarter of 2016, PPC said. It plans to work with China’s Sinoma International Engineering Co. (600970) and Holtec Consulting Pvt., an Indian project management company.

Cement selling prices in Algeria are $80 to $120 per ton “with favorable costs of production due to affordable gas prices,” PPC said.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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