Habesha Cement Share Company (Habesha) has over 16 000 local shareholders. The modern plant is designed for an annual cement capacity of 1,4 million tonnes, and is well positioned to serve the Addis Ababa market as it is 35km north-west of the capital. PPC increased its stake to 38% in Habesha.
For accounting purposes, the commissioning date for the Habesha plant was 1 January 2018, and it was equity-accounted for three months in the reporting period. The business delivered about 300 000 tonnes for the period, with some 120 000 tonnes accounted for in the income statement and the remainder in the balance sheet. A net loss of R61 million was realised, mainly due to foreign currency translation losses and finance costs. Business performance for the review period was affected by instability in the country causing several operational disruptions.
Ethiopia is widely projected to be the fastest-growing economy on the continent in 2018, driven by public investment. Recent political reforms could support this growth as foreign investors reassess the country's potential. Real GDP growth is projected at just under 7% per annum over the medium term, although this may be constrained by ongoing liquidity challenges. The government is addressing the significant divergence between official and parallel market exchange rates through initiatives that include export promotion and import substitution.
Major infrastructure projects in the pipeline to support economic growth include the Grand Ethiopian Renaissance Dam, Kyoso Dam, sugar factories, houses, industrial parks and railway lines. These are expected to increase cement demand in the short to medium term. Habesha's route-to-market strategy positions it to benefit from growth among construction and concrete product manufacturers, driven by efficient delivery solutions, product innovation and technical support. Executing its export strategy to generate foreign exchange will be prioritised.
Operationally, Habesha continues to source alternative local input materials to mitigate liquidity challenges in the country. It also signed a technical service agreement with PPC to support it in developing operating best practices. The key focus remains optimising the operation to meet expected volume growth, entrenching value-based management principles to improve productivity and embedding business systems and processes.
Habesha will continue to strengthen relationships with local communities, regional government and other key stakeholders through corporate social investment, as well as developing and supporting small and medium enterprises.
Key value-creation initiatives focused on:
- Executing route-to-market strategy
- Ensuring sustainability
- Continually engaging with stakeholders
- Mitigating liquidity challenges