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Merger raises Dangote Cement capacity to 20m metric tonnes

Indications have emerged that the synergy derivable from the merger of  Dangote Cement Plc (DCP) and Benue Cement (BCC) will increase the production capacity of the company to 20 million metric tonnes by the end of 2011.

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The increased production will lead to  the Federal Government  objective of achieving self-sufficiency in cement production.

The merger, according to the scheme of merger of DCP and BCC,  will boost local production, create more jobs and also lead to an increase turnover which will rub off positively on the company’s shareholders.

At the moment the combined cement production capacity at Obajana and BCC plants is eight  million metric tonnes  per annum.

A new production line in Obajana with annual capacity for five million metric tonnes and the greenfield plant at Ibese, Ogun State with annual production capacity of six  million metric tonnes are expected to be completed by the first half of 2011. Production capacity at BCC is also expected to increase to four  million metric tonnes from the current level of three  million metric tonnes before the end of 2011. All of these will bring the total production capacity of the group to 20 million metric tonnes by the end of 2011.

President and chief executive of Dangote Group, Aliko Dangote, recently assured that the new Dangote Cement Plc will effectively support the Federal Government’s effort in boosting local cement production in Nigeria. Aliko said that by 2013,DCP’s capacity may exceed demands by 5.08 million metric tonnes and this, according to him, “ is based on the assumption that cement consumption will continue to grow at an annual rate of 10%, and that total installed capacity would reach 26.75 million MT per annum after 2012. Thus, demand has been estimated to increase from 14.8 million MT in 2009 to 21.67 million MT by 2013.”

He explained that the saturation of the Nigerian cement market will ultimately shift the focus of manufacturers to export markets in neighbouring African states where demand is expected to remain high while supply remains limited.
He said: “The excess of 5.08 million MT between estimated demand and planned expansion is forecast to serve as the export capacity threshold for Nigerian cement manufacturers (especially companies that have access to international markets)”.

Commenting further on the benefits of the merger, he said the coming together of the two companies will lead to better access to financing and also that it will result in greater operational integration between them and also make the consolidation of their supply and distribution chains more effective.

“Following the merger BCC and DCP will be able to share facilities, inventory and other resources without having to track and reconcile cumbersome inter-company balances. BCC shareholders would also benefit from the superior production technology of DCP and this will yield significant administrative cost savings”.

Noting that the post merger entity will incur only a single set of expenses such as Annual General Meetings, Board of Directors and communications to shareholders, he said the post merger entity will also present a robust value proposition for shareholders; and existing BCC shareholders would especially benefit from an expected significant immediate accretion in earnings and net assets per share post merger.


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