Dangote Cement listing boosts Nigerian SE

The Nigerian Stock Exchange (www.nigerianstockexchange.com) saw its capitalization boosted by the Naira 2.1 trillion ($14 billion) listing of Dangote Cement on 26 October. The company (DANGCEM.LG) listed 15.5 bn shares at N135 each (US 90 cents) after a merger in October with local rival Benue Cement. It is the country’s leading cement maker and the biggest listing on the NSE.
According to a company press release, Dangote Cement executives said the firm plans to sell a further 20% of its shares, worth $2.8 bln based on the listing price, in a global offer over the next 18 months, probably in London. Listing broker Afrinvest said 25% percent of the shares were theoretically on offer in Nigeria but the local market, whose capitalisation was just over N6 trillion before the listing, was unlikely to have the capacity to buy that amount. The regulator in Nigeria requires a 25% free float.
According to the press release, Afrinvest Chief Executive Godwin Obaseki said: “Because the market is not likely to absorb all of that quantity, the (stock exchange) council has given a special dispensation to sell the remainder over the next two years,”
Holding company Dangote Industries Limited had held majority stakes in both Benue and Dangote Cement and the free float was initially only 4.1%. The owner of Dangote Industries is Nigerian industrialist Alhaji Aliko Dangote, ranked by Forbes the richest man in Nigeria and one of the richest in sub-Saharan Africa. Dangote sold $154 million worth of shares to bring the free float to 5.2%. Dangote’s business interests include listed flour and sugar companies.
He said of the listing that he wanted “to create an African champion that can compete with the largest cement companies in the world”. He said the transaction is taking place “at a crucial moment in the history of cement demand and supply, and at a crucial moment in terms of Dangote’s pan-African ambitions.”
He is setting up cement plants and import terminals around Africa including in Ethiopia, Ghana, Ivory Coast, Senegal and Zambia, and aims to produce 46 million tonnes of cement a year in Africa by 2015, of which 30 million will be made in Nigeria. Dangote told reporters he plans to transfer all his cement assets outside Nigeria — currently owned by Dangote Industries — into Dangote Cement by the first quarter of 2011.
The aim of the merger with Benue was to allow Dangote’s cement operations better access to financing, as well as consolidating supply and distribution chains, reducing costs and helping increase cement production more quickly.
Another press release announced that a deal was finalized on on 15 October through which Dangote Industries Limited upped its stake in Sephaku Cement (Pty) Limited, which is based in South Africa, from 19.76% to 64% with a R779 million ($115 million) investment into Sephaku. The press release says this is the largest foreign direct investment (FDI) by an African company into South Africa.
The deal was concluded at the shareholder general meeting of Sephaku Cement on 15 October 2010 and formally announced to the media and investor recently.
Many commentators are very positive about the listing, forecasting a higher price shortly. All concede that it is too big to ignore and anyone investing in Nigeria must take account of this, since it makes up 25% of market capitalization and is one of the most active stocks. However, some analysts wonder whether the ambitious growth targets are to be achieved and whether the share justifies its high rating compared to global cement companies such as Lafarge. The share price was given as N128.25 at the close of 4 November on this helpful website (www.stockmarketnigeria.com).
However, all seem to admire the way Dangote succeeds in difficult environments, building his own infrastructure including power, rail and other needs, if poor national infrastructure is blocking growth and supplying desperately needed inputs for Africa’s economic growth.
The group website (www.dangote-group.com) says the company “is a fully integrated cement company and has projects and operations in Nigeria, Benin and Ghana; with total existing production and import capacity of 14 million tons per annum and new production projects in development with 11.1 million tons per annum additional capacity.
The Company operates the Obajana Cement Plant (OCP), the largest cement plant in sub-Saharan Africa. Aggressive growth plans target a strong pan-African presence as Dangote Cement evolves to become a truly multi-national corporation.
As part of this drive, Dangote Cement is committed to making Nigeria a net exporter of cement. The company owns four terminals, two in Lagos and two in Port Harcourt through which it currently imports cement. These operations will progressively be replaced and converted into export terminals as new production capacity comes online in Nigeria.”

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