13th – 19th January 2003

Bamburi: East Africa’s Biggest Cement Producer

To help develop the economy and fight against poverty, Bamburi Cement is promoting sustainable environmental conservation, writes WAMBUA SAMMY.

When Felix Mandl, a director of Cementia Holding A. G. Zurich, founded Bamburi Cement Ltd in 1951 and later went into partnership with Blue Circle PLC (UK), he probably had no idea that the venture would grow into the biggest cement concern in sub-Saharan Africa.

Subsequent boardroom deals saw LaFarge – the world’s largest building materials group – acquire Cementia in 1989, thus becoming an equal shareholder with Blue Circle. LaFarge bought Blue Circle in 2001 to become the largest building materials company in the world and Bamburi Cement’s principal shareholder.

Bamburi, which was ranked 16th in last year’s East Africa’s Most Respected Company survey, is thus not just another cement manufacturer but a comfortable member of the world’s biggest cement family.

Bamburi’s first plant in Mombasa – the second largest in sub-Saharan Africa – started production in 1954, with annual capacity of 140,000 tonnes of cement. Today, it can produce 1.1 million tonnes.

Last year’s post-tax profit rose 64 percent to Ksh653 million ($8.17 million) for the first half of 2002, buoyed by strong sales by its Ugandan subsidiary, Hima Cement, which has a factory in Kasese, western Uganda. Kenya’s cement market registered a relatively slower growth of eight percent over 2001 while Uganda’s grew by 16 percent.

Bamburi acquired a significant stake in Hima Cement Ltd in 1999. the plant has a capacity of 240,000 tonnes. Hima has significantly improved Bamburi’s market presence in Uganda, and will provide it with leverage in the Great Lakes region.
Last year, Bamburi made a total dividend payout of Ksh363 million ($4.54 million), compared with Ksh136 million ($1.7 million) the previous year. This works out at a 20 percent increase or a shilling per share, compared with 7.5 percent during the first half of 2001.

Expansion in the past five years has given Bamburi a commanding a 58 percent market share in east Africa. The firm has a 20 percent stake in Athi River Mining, which it acquired in 1998 for Ksh180 million ($2.27 million).

Bamburi chairman Richard Kemoli says the firm also benefited from stable prices, lower power costs, prudent cost management and some growth in exports to countries like Somalia, Congo an Rwanda. Having completed its heavy investments phase, the company has drastically reduced its costs and improved cash flow.

According to Bamburi managing director Didier Tresarrieu, the company is also widening its product portfolio by marketing the cement it produces in new areas like low-cost housing and the construction of roads. Bamburi Special Products Ltd, which produces paving blocks under the brand name Bamburiblox has been incorporated to look after this new business.

In 1998, a new one million tonne per annum clinker grinding plant was added in Athi River, 30 km southeast of Nairobi, increasing total production capacity to 2.1 million tonnes. With the new plant, Bamburi has improved its service to Nairobi and upcountry markets, through speedier and more efficient packing turnaround time. A railway connection has also facilitated sales to western Kenya and Uganda.

The company is one of the largest manufacturing forex earners in Kenya, exporting 28 percent of its production in 1998. Export markets include Reunion Island, Uganda and Mayote island. In the past, they have also included Mauritius, Sri Lanka, the Comoros, Madagascar, Seychelles and Congo.

In non-monetary terms the economic spin-offs from Bamburi derive from the fact that it is one of the largest cement producers in sub-Saharan Africa, the largest manufacturing export earner in Kenya, one of the largest industry at the Kenyan coast and one of the biggest electricity consumers in Kenya.
According to Tresarrieu, from a private cement company’s point of view, East Africa’s market is small and unsophisticated. The cement consumption is significantly low, at 30 to 40 kg per capita per year compared with that of South Africa, which is 200 kg, or Ghana at 80 kg.

The costs of production and prices, he says, are also high. “We are not on a level playing field with Egypt.” Also inhibiting business is the fact that more than half the East African population lives under international poverty lines. Actually, 56 percent of the population lives on less than a dollar a day.

So, how was Bamburi remained profitable? “By respecting group ethics,” says Tresarrieu. “We strive to maintain international standards set by our main principals, the LaFarge group, on production processes, safety, product quality and efficiency, despite local constraints, such as high power costs,” he adds.

Bamburi’s social responsibilities entail serving its external and internal publics by, for example, developing people through training and attachments to other business units. “This also entails properly compensation retrenches and shunning any form of corruption,” says Tresarrieu.

To help develop the economy and fight against poverty, Bamburi Cement is promoting sustainable environmental conservation through the Heller Park, a common world class initiative at the Kenyan Coast.
The cement giant is also sensitizing governments and the public at large on improving the infra-structure and developing low cost housing, which will in turn spur economic growth.