Lafarge Denies Kenyan Cement Dominance as Competition Grows

Lafarge SA (LG) rejected an assertion by Kenya’s antitrust authority that the company may be flouting domestic competition rules and said it wants to work with the government to boost returns in the nation’s cement industry.

The Competition Authority of Kenya is probing the Paris-based company’s influence on prices through its 59 percent stake in Bamburi Cement Co. and 42 percent interest in East Africa Portland Cement Co., the nation’s biggest and third-largest producers of the building material. New entrants have diluted Lafarge’s sway over the market, according to Didier Tresarrieu, the company’s representative on EAPCC’s board.

“With the arrival of new players and growing demand, Bamburi’s market share has been decreasing over time and is now in the region of 39 percent,” said Tresarrieu, a former managing director at Bamburi, in an interview yesterday in Nairobi, the capital. “None of the players is dominant and there is therefore no possibility of abuse of a dominant position.”

The competition authority said earlier this month it may force Lafarge to sell some of its interest if the company is found to have a dominant position in violation of antitrust legislation. Its investigation comes amid a dispute between shareholders and the government over ownership of EAPCC. Kenya’s Treasury holds a 25 percent stake in the company, while the state-owned National Social Security Fund has 27 percent.

‘Monopolistic Stake’

The government wants Lafarge to dilute its shareholding in EAPCC because no company should hold a “monopolistic stake” in Kenyan industries, Industrialization and Enterprise Development Permanent Secretary Wilson Songa said Feb. 12.

Lafarge is a “financial investor” in EAPCC and, with two out of seven seats on the Kenyan company’s board, doesn’t exert any “operational leverage” on its management or operations, Tresarrieu said.

“As a minority shareholder in EAPCC, Lafarge needs to be respected,” he said. “We are on the same page with government because as shareholders we are looking for the same thing, namely a good return on our investment.”

Kenya, East Africa’s biggest economy, has seven cement producers, including ARM Cement Ltd., National Cement Co., Mombasa Cement Ltd., Savannah Cement Ltd. and Cemtech Ltd. Lafarge is the world’s second-largest producer with operations in 64 countries. National, Mombasa and Savannah began operating in Kenya over the past four years, while Cemtech said in July it’s building a plant in northwestern Kenya.

Nigerian Competition

Dangote Cement Plc (DANGCEM), the continent’s biggest producer of the building material, plans to establish a $600 million production plant in Kenya, the country’s ambassador to Nigeria, Tom Amolo, said on May 4.

EAPCC warned last week that full-year profit may drop at least 25 percent because of increased competition. Sales have fallen “dramatically” in the year that ends June 30, it said.

Kenyan cement prices were the second-highest out of six southern and eastern African countries, including South Africa, Zambia and Tanzania, studied between 2000 and 2012, according to a report published last month by the African Competition Forum. The cost of a 50-kilogram (110-pound) bag ranges from 700 shillings ($7.96) to 750 shillings, according to TradeMark East Africa, a Nairobi-based research group.

To contact the reporter on this story: Charles Wachira in Nairobi at cwachira@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net Paul Richardson, Emily Bowers, Sarah McGregor

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