CCNN Plc Completes Sokoto Plant Expansion (Pictures)

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Expansion completed, capacity now up to 2 million MT

CEMENT COMPANY OF NORTHERN NIGERIA (CCNN) recently announced that it would be commissioning a new production line with an annual capacity of 1.5 million MT, increasing the company’s cement annual production capacity to 2 million MT. This expansion will be the first major investment in CCNN since the BUA group took controlling interest in CCNN in 2010. We understand that the line, built for an estimated $350 million, is configured to run on multiple fuel sources particularly LPFO and coal. The expansion also comes with a 32MW captive power plant which we expect to be used to power non-kiln operations of CCNN, with the excess likely to be sold to the grid.

CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur

How does this impact CCNN?

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We expect the expansion to support earnings over the long term given that the company’s sales had been capped by its 0.5 million MT capacity for a while now. We note that the CCNN has enjoyed relatively decent volumes in recent years (5-year average: 0.46 million MT), with the company even reporting a 100% capacity utilization in 2013. Notably, CCNN’s lowest production over the same period (2015: 0.40 MT), stemmed from production disruptions – due to LPFO shortages amidst healthy demand.

CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur

However, with this expansion, we believe CCNN is well positioned to benefit from our positive outlook for cement consumption – stemming from increased public and private sector demand. Consequently, we estimate an average 8% volume growth in the medium term amidst stronger demand. Also, we expect the plant expansion to support exports to neighboring countries (Benin Republic and Niger) as the company ramps up sales to these regions.

Read Also:  Sokoto Cement records NGN1.2 billion profit for 2016

CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur

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We expect CCNN to benefit from economies of scale and increased efficiency from a newer plant. Also, we see value in the increased fuel flexibility of the newer plant. It is unclear what the fuel mix would be at the plant but we anticipate the decent use of coal and expect the recent discovery of coal in commercial quantities in Sokoto state to drive the use of the alternative energy in the near term. Given that coal (0.67x-0.76x the cost of gas) is a cheaper fuel source than LPFO (1.9x-2.5x the cost of gas), we expect the diversification, to be positive for CCNN’s margins.

CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur

Meanwhile, we note that the plant is estimated to have cost $350 million which had not been reflected in CCNN’s books as at Q1’18. Details of the financing are also unclear for now. We expect more clarity on these after the plant becomes operational. Finally, we recall that investment in cement industry will be exempted from pioneer tax relief from 2020. However, we expect CCNN to still enjoy this in the next two years.

Valuation maintained pending further details

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All in, we believe that the expansion is positive for the company as it puts CCNN in a better position to take advantage of increased cement demand and the favorable outlook for the sector. However, pending further details of the plant operations, we retain our previous target price.

 

About Analyst/Author

Onyeka Ijeoma  [email protected]

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CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand SpurCCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur
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CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand SpurCCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur

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Hong Kong ICT Awards 2021 opens for enrolment

HONG KONG SAR - Media OutReach - 23 April 2021 - The Hong Kong ICT Awards (HKICTA) 2021 is open for enrolment today (April 23). Entries of locally developed information and communications technology (ICT) products and solutions are invited to compete for the Grand Awards in the eight award categories, and the top accolade of the competition - the Award of the Year. The deadline for enrolment is July 16, 2021.


Steered by the Office of the Government Chief Information Officer (OGCIO), the HKICTA 2021 is organised by eight local industry associations and professional bodies. The award categories and respective Leading Organisers are listed below:


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A Grand Award will be granted in each category. A Grand Judging Panel, to be led this year by the President of the Hong Kong University of Science and Technology, Professor Wei Shyy, will select the Award of the Year from the eight Grand Awardees.


Since its debut in 2006, the HKICTA has endeavoured to recognise and promote outstanding ICT inventions and applications, thereby encouraging the pursuit of innovation and excellence among Hong Kong's ICT professionals and enterprises to meet business and social needs, bring benefits to the community through adoption of innovation and technology, and foster Hong Kong's smart city development together.


Details of the HKICTA are available on the thematic website (www.hkictawards.hk). Enquiries can be made to the OGCIO at 2582 4318 or by emailing [email protected]


CCNN Plc Completes Sokoto Plant Expansion (Pictures) - Brand Spur
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