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Clinker grinding at Guinea’s largest plant: Philippe Zacca, Guinea Industries Ciments / Bulk Group (Lebanon)

Filmed at Cemtech MEA 2015, 8-11 February, Grand Hyatt Dubai, UAE

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Good morning. So I'm here to present Guinea Industries Cement, which is the new grinding plant in Guinea, and talk about a little bit the Guinean cement market, which is not well known to everybody. See its not working. Okay, so the GIC factory, Guinea Industries Cement, was completed and commissioned during February 2013.

It is the largest Clinker grinding plant in Guinea with a nominal capacity of 850, 000 tons per year. It's joint venture of $35 million joint venture between [xx] group, Lebanon, and local Lebanese-Guinean companies specializing in steel supply. Some of you might know conservate [xx], it's [xx] group trading entity which specializes in the trading of cement clinker, coal, pet coke and other additives necessary for the production of cement.

This is a picture of the new grinding plant in Guinea. To introduce Guinea a little bit, Guinea is a country in West Africa which borders Guinea-Bissau and Senegal to the North of it, Mali is to the East, and Sierra Leone, Liberia and the Ivory Coast to the South. It's not a too big of a country. Now you've 245,000 square kilometers, about 12 million population growth, at 2.5%.

Urbanization is a mere 35%, so there's a lot of construction yet to do in the country. The economy is mostly based on export of minerals, particularly Bauxite which is, which Guinea is estimated to have 1/3 of the word's reserve. Guinea has also a significant reserve of Iron ore which has yet to be tapped into, there has been a lot of talk recently with Rio Tinto to start export of iron ore but not before 2018 - 2019.

Mining accounts for 70% of exports, the rest is including gold and diamonds. GDP is $5.5 million nominal, at purchasing power parity it's about 12.2 million. So it's quite low $505 per capita. GDP growth is at 3%, and the currency there is the Guinea franc. Guinea is not quite of the union of safafco.

So, looking at the cement market there, as you can see, like most of West Africa, the capacity has increased dramatically over the last two to three years. Going from about 400, 000 tones in 2000, prior 2012 to close to 2 million in 2014 and above 2 million in 2015. Unfortunately, consumption has not followed the same pattern.

Growth for the last couple of years has been at about 4 - 5%. As a result, import have decreased to almost nothing. The JIC factory is located in the industry area of Conakry, which is about 30 kilometers from the port. We've a large land of 150, 000 square meters and another 4,000 at the port for the discharge of imported clinker.

We've 200,000
cubic meter of close storage, good for about 125, 000 tons of clinker, 3,000 square meters of back cement warehouse, above 200 employees and a sales office near the city. So, our total capacity is 120 tons per hour, we've 250 tons per hour grinding mills, 120 ton per hour grinding mill for the additives, 40 ton per hour drying and crushing unit for the additives as well, 160 ton per hour packing machine. Most of our sales are in bags, we also sell big bags and box cement which we introduced to the market in Guinea. We have 2 times, 1500 tons Box cement silo, and a smaller 500 ton silo as well. Other equipment which we also have are three helpers at the port, several wheel loaders to feed the system as well as to load the Clinker trucks.

We own and lease, or lease 26 dumper trucks to do the transport between the port and the factory, and 7 Box Cement Silo trucks. Given that we're in West Africa, we also have 6 megawatts of standby power using generators because electricity is quite a headache in Guinea, government electricity. The factory produces cement according to your PM standard and we only use Pozzolans as an additive.

And we produce three types, only three types of cement. So the first one is CEM 142.5R which we sell in bags as well as bulk. CEM 2 42.5 and which we also sell in bags and bulk, and then of course 32.5 which is only sold in bags. The ratio of cement sold in bags versus bulk is 95% the bags to 5% bulk. Although, we are seeing an increase in sales of box cement, and we do expect a bit higher than 5%

for 2015.

Other players in the market Cimaf,
of course which colleagues here have talked about already, is a Simon le Athletes subsidiary and they commissioned 500, 000 ton for your grinding plant in November 2013. We also have Guinea Simon de[sp?] Guinea which is a wholesale[sp?] subsidiary since 1998, although the place was established in the 1960s and was owned by the government back then. It was predominant, was the only player in the market until 2013, and it operated as both a grinding plant as well as cement terminal up until 2014.

Today only operates at 350 tons, 350, 000 tons per year capacity and only operates one grinding unit. The third player which is expected to start operating in April of 2015, is Washam diamond cement subsidiary with a 400, 000 ton per year capacity. So, as we can see, prior to 2013, the market was divided into

basically 50% of sales were done by Simon Le Guinea and the other 50% was imported product, imported cement in bags. This changed with our factory coming in line and in 2013 we managed to take about 30% of the market, and in 2014 with Cimaf coming into the market, the market became split basically into three.

With imports going down substantially and today they are almost zero. As a result of the new capacity, you can clearly see that it has had an effect on prices, prices were quite high prior to 2012 and went down by about 20% today, to a price which by African standard, is not very high, the market has become quite competitive in Guinea.



The quality
of our cement is reputed to be the best in the country, as well as the quality of our packaging which is important in West Africa because hardly enough the packaging is, the bags are always used for other things than cement afterwards, rice or anything that might come to mind.

We provide competitive prices, very good payment terms which is also new in West Africa. We have highly reliable distribution network. Zero interruption in delivery which is also new in Guinea, particularly giving the electricity situation in the country. Which I'm going to talk about next as in this part of are key challenges.

So, electricity is a major constrain in the country with average outages of about 10 hours a day spread over three four times a day. So we might have like two, three hours of electricity then a cut off of about two, three hours, then another three, four hours electricity then another cut off and so on and so forth.

This is quite damaging as you might you know to our equipment, so we do have a high rate of spare parts spending. Another challenge is the port. We only have one Pierre allocated the discharge of both materials. We're already three factories discharging clinker with a fourth coming in. There's also rice, sugar discharged on the same pier.

So as you might guess there's a lot of damage involved in the discharging clinker in Guinea. Another challenge is foreign exchange liquidity, its sometimes difficult to find the US dollars or Euros in the market, particularly during a few months, a year and this is a big challenge because most of our purchases are done in dollars or euros, related to clinker or additives or even spare parts.

A big difficulty we encountered in 2014 is the Ebola pandemic which has had catastrophic effect on the economy of Guinea, not as much as Sierra Leone or Liberia which were hit much harder, but for us we did see sales go down by about 20% during the fourth quarter of 2014, and it has limited the growth potential for 2015 as well.

Although during the first quarter, things have began to improve and slightly but its still not back to the level where it was before the pandemic. Another challenge is the tough competition. Now in conacre as mentioned we're now four factories providing about 2 million tons of cement capacity in a market that only consumes about 1.2 million tons.

So, the ratio here is about 60%. Finally, the outlook, we expect 2015 to be a difficult year for cement producers in Guinea, for one the new player in Diamond Cement, two, the Ebola virus has yet to be eradicated. We are hopeful that by 2015, it will be eradicated with the eyes of the world all turned around it and new vaccines being in development, new medicine as well.

Also another difficulty for 2015 is a political one because Guinea will go through a presidential election in December, and given experiences in West Africa, this tends to be quite challenging because of depending on the mood on the street. With smooth passage of the elections, we do expect 2016 to be the year where growth returns to the country and hopefully this will be the case for the producers in Guinea.

Thank you.

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