Kenya’s cement consumption leaps further ahead of production

Kenya’s cement industry, the largest in East Africa, will benefit from increased government spending on infrastructure projects and investors should buy shares on price dips, according to Kestrel Capital East Africa Ltd.

“Increasing government capital expenditure in power and transport infrastructure projects will aid cement consumption growth,” the Nairobi-based brokerage said. Domestic consumption is growing at a faster rate than production, and Kenya’s market is expected to consume 81 per cent of output, compared with 77 per cent last year, trimming exports, it said.

Cement production in Kenya was 4.2Mt last year, followed by Tanzania at 2.5Mt and Uganda’s 1.7Mt, Kestrel said. The broker rated the Kenyan industry 'accumulate' in new coverage.

Kenya is boosting spending on infrastructure as it seeks to more than double its economic growth rate to 10 per cent by 2015 from 4.6 per cent last year. Projects planned by the state include a new terminal at the country’s main international airport, a standard-gauge railway from the port of Mombasa to Malaba at the Ugandan border and a new harbour at Lamu.

Bamburi Cement Ltd, East Africa’s largest cement producer, had its price target raised to KES234.42 (US$2.65) from KES142 (US$1.62), while the recommendation was retained at "hold", according to Kuria Kamau, Kestrel research analyst.

ARM Cement Ltd’s price estimate was increased to KES77.50 from the KES43.4 set in July 2011, with the recommendation set at 'accumulate' from 'buy'. 'Accumulate' means investors are advised to buy more shares during price dips, Kuria said.

East African Portland Cement Co, the smallest of Kenya’s three publicly-traded cement manufacturers, was rated 'buy' in new coverage with a price target of KES111.09, he said.