SEPHAKU Holdings, the cement company that owns Métier and is a joint investor in Sepahku Cement, looks determined to break into the competitive Western Cape market.
Sephaku is a relative upstart in the cement game, and has Nigeria-based Dangote Cement in its ambitious Sephaku Cement venture. But recently the group indicated that a restructured Métier cement business was well positioned to be profitable and competitive in new markets such as the Western Cape.
Sephaku indicated a plant would be constructed in the Western Cape with production targeted to commence during financial 2022. There is not much detail to hand at this early juncture – but this would be the first time Métier breaks out of its traditional Gauteng and KwaZulu-Natal markets. The location of a new cement plant would be an interesting decision, and this will hopefully be confirmed shortly.
At the moment the big market players in the Western Cape are PPC, LaFarge and Afrisam.
One should perhaps not underestimate Sephaku’s ability to break into the Western Cape cement market. With Sephaku Cement, the group was the first new entrant into South Africa’s cement industry since 1934 – a decision initially met with much scepticism as few believed a newcomer could shake up a well-established market.
In its recent results, Sephaku said it was pleasantly surprised by the surge in bagged cement demand in the post-hard lockdown phase – a development largely assumed to be an unexpected result of additional consumer discretionary income.
Sephaku directors said the increase in cement demand appeared to be linked to the increased home renovations as numerous people worked remotely during the year. They added that the increase in the sales of other home improvement materials as reported by the major building materials merchants confirmed this possible trend.
For the record, Sephaku Cement’s revenue in the year to end March showed increase of around 10% year-on-year – mainly due to increased sales volumes, even though the unit price increase was unfortunately muted due to competition from other cement producers, blenders and imports.
While Métier saw sales revenues down to R634 million (previous year R727 million), profits were up strongly to R55 million (R35 million). Most encouraging was that the profit margin was reinforced at 8.7% – much better than the more brittle 4.8% seen in the previous financial year. Interestingly Sephaku Cement’s margin is around 16%.
Of course, major cement players like PPC will not just let Sephaku stroll into the Western Cape and gobble up market share. In its recent financial report PPC noted declines in cement volumes in its coastal markets – but did explain that a muted recovery in commercial construction activity and the unavailability of slag following the closure of Saldanha steel accounted for the decrease in sales in the coastal regions.
PPC directors did note that in the last quarter of the financial year, sales trends suggested stabilisation in demand in the coastal areas.
