PPC set to enter the Algerian cement market

PPC announced that advanced plans are in place to enter the Algerian cement market through a partnership with Algerian private sector investors in Hodna Cement Company.

Hodna will be constructing a 2Mta plant for approximately US$350m in the Hodna area, roughly 300km east of Algiers and close to the university and technology-focused town of Setif.

PPC will acquire a 49 per cent stake of Hodna and assume management control which allows for the consolidation of the financial results of this project into the PPC group accounts. The transaction will be funded on a project finance basis, with 80 per cent debt funding from local Algerian banks.

"The Algerian cement market is very attractive as consumption exceeds local production by approximately 3Mta of cement. Moreover the Algerian government has committed itself to large scale capital spending programmes, including the US$6bn New City Hassi Messaoud project, which will see the rollout of thousands of housing units This will certainly boost the demand of cement in this country," said Ketso Gordhan, CEO of PPC.

Once the feasibility study has been concluded, construction of the plant will take up to 30 months with commissioning anticipated by the fourth quarter of 2016. As with its other expansion projects, PPC intends to engage China's Sinoma International Engineering as the contractor that will supply and build the plant; supported by India's Holtec Consulting, specialists in project management.

PPC noted that the factory site is well located with the necessary raw materials in close proximity. The well-developed road and rail network also assist in managing the cost of logistics.

With a population of close to 40 million people, of which 74 per cent live in urban areas and a relatively high GDP per capita of US$5582, Algeria still requires the construction of 225 000 housing units per year to meet demand. The national housing shortage in Algeria is estimated at 1.2 million units.

Mr Gordhan added: "We are already building cement plants in three countries; Ethiopia, Rwanda and the Democratic Republic of the Congo. This project sees us entering yet another African country and gives us confidence that by 2017, 40 per cent of PPC revenues will be earned outside of South Africa."