Kenya Cement Manufacturer to Back Expansion with Eurobond
ARM Cement Ltd., Kenya’s second-largest maker of the building material, is considering selling Eurobonds to help fund a planned $300 million expansion program, Managing Director Pradeep Paunrana said.
The sale of debt will follow the Kenyan government’s planned offering of as much as $2 billion of the securities by January, Paunrana said in a Nov. 5 interview in the capital, Nairobi. The company intends to double cement production within four years from 2.5 million metric tons in 2012, Deputy Managing Director Surendra Bhatia said in the interview.
Kenya’s sale of Eurobonds “will set the stage for other corporates to tap into the Eurobond markets,” Paunrana said. “That is one of the events we are looking at anxiously as we plan our own capital raising.”
Production in Kenya’s cement industry, the largest in East Africa, climbed 3.5 percent to 4.64 million metric tons last year, according to Kenya National Bureau of Statistics data. Growth is being driven by government spending on infrastructure projects like upgrading ports and constructing new roads, as well as home builders trying to meet an annual deficit of 440,000 units, according to Kestrel Capital East Africa Ltd.
Cement consumption per capita surged 60 percent to 85.7 kilograms (189 pounds) over the past five years, the Nairobi-based brokerage said in a August research note. Demand is expected to grow at 2.7 times gross domestic product growth over the next three years, compared with a 2.4-times-GDP increase in production, Kestrel analyst Linet Muriungi said in the report. Kestrel has an accumulate rating on the industry.
-Written by Eric Ombok