The Chinese cement producer will invest the U$116 million into Maweni Limestone to settle its liabilities while another U$30 million will be used to complete plant construction and an upgrade. ARM Cement operates an integrated plant at Tanga and a grinding plant at Dar es Salaam.
The agreement dates back to September 2019 when it was publicly announced, well before the current health scare that the deal is in the pipeline. The acquisition is part of the Chinese expansion plan in Sub-Saharan Africa which started in 2013.
ARM Cement has seriously suffered financial constraints since 2017 when cement demand fell in Kenya, a coal import ban in Tanzania caused production issues at its Tanga plant and increased competition hit both countries.
It entered administration in the summer of 2018 and previous owner Pradeep Paunrana has been fighting PricewaterhouseCoopers’ attempts to sell the business to local rival National Cement in Kenya. In some respects the timing of this deal may also be bad for Huaxin Cement given that it’s just suffered a 36 percent year-on-year drop in sales revenue to US$542m in the first quarter of 2020, due to the coronavirus outbreak. If the company can’t absorb this through the rest of the year then it might have a problem.
The real trend here in Chinese expansion strategy by its cement sector is a move from imports, building plants and co-financing projects to outright asset acquisition. This isn’t the first example either. West China Cement completed its purchase of a majority stake in Schwenk Namibia for US$104m in January 2020.
This gave it control of Ohorongo Cement. Other recent Chinese moves in Sub-Saharan Africa include the supply of a modular grinding mill in Guinea by Sinoma and the competition of construction of a 1Mt/yr integrated plant in Lubudi Territory in Democratic Republic of Congo by another CNBM subsidiary, Tianjin Cement Industry Design and Research Institute.
An outlier from the more traditional Chinese routes of either supplying equipment and/or co-financing cement plants in Africa has been the CNBM/Sinoma plan to build a 7Mt/yr ‘mega’ plant in Tanzania.
Once completed it will nearly double local clinker production. Unsurprisingly, when it was first announced it was pitched towards the export market. Together with the Huaxin Cement purchase, once the CNBM project completes, Chinese companies will own the majority of cement production capacity in Tanzania.