Considering the challenges Ashaka Cement plc had before Lafarge Africa acquired controlling stake of it, how would you say it’s influence and expertise have impacted on the Gombe-based company?
In 2013, we had a merger, so to speak, with Lafarge Africa, in businesses in Nigeria and also in South Africa. That size created an opportunity for AshakaCem to leverage on the global expertise of Lafarge.
By bringing the companies together, for example, we’ve been having exchange programmes whereby our staff in Nigeria can go to Lafarge in South Africa to learn how things are done across the value chain.
That is one advantage. Another advantage of the coming together is the cross-movement of professionals within the industry. Now, it is easier for people to move from here to WAPCO in Ewekoro or to Unicem in Calabar and vice versa. The cross fertilisation of ideas has created a lot of value already.
The other important question is what has it created for shareholders, because ultimately that is what is important. The answer is that it has provided a stronger platform to create value by coming up with innovative solutions and cross-fertilisation of businesses. For example, Lafarge has the global procurement expertise in settling complex procurement activities.
Since we are discussing business here, I’d want us to discuss the impact in figures. Where was AshakaCem then three, four years ago and where is AshakaCem now, in figures?
In 2014, as an example, Ashakacem posted a profit of N4.8 billion. Last year, we closed at N2.7bn. We had challenges of insurgency issues, and we even took a P&L (profit and loss) of over N2bn out because of that. So it is complex to say this is the impact, if you want to look at it purely from the P&L perspective.
The reason is because a lot has changed. A good example is our result for the 2016 half year which was about N1 billion. Why was that? There are so many reasons. One will need to consider what the price of cement was, what is the cost of the inputs that go into production, and what is the cost of forex – and we have a lot of forex exposure. The hike of forex cost definitely has an effect on results.
To what extent did the insurgency challenge slow AshakaCem down?
We had serious problems arising from the insurgency. The federal government did well to come to our rescue by declaring AshakaCem a critical national asset; that has helped in stabilising our operation. The insurgency, in some sense, created a situation where it was difficult to push out cement. Nobody wanted to go there and we actually had to evacuate some of our staff. That was the biggest challenge we had there.
Today, things have stabilised on that front and we are very happy with the situation now. Things have gone from bad to good.
However, business and economic challenges have evolved. Everybody knows the situation we are facing. There was a problem in the ability to generate demand because if we can all remember, we didn’t have the budget early and there was pressure of funding until last month when contractors started going to sites.
That was from the government side. On the individual side, to the individual home builder, his first priority is to feed before he talks about building a home. When you have the kind of very complex situation that Nigeria has, it would be difficult to pump money into construction activities.
That is a key challenge. Apart from that, power is a key component. We are a big consumer of energy,and it’s been difficult to access energy.
Cement companies source 90 per cent of their raw materials locally, so what informed the sudden hike, about 45 per cent, of the price of a 50kg cement bag from N1,600 last Monday to N2,300 two days later?
There are other drivers of production beyond the local raw materials. There is the cost of sourcing forex, for example, to procuring the many other things that are used in cement production and other areas. And we all know the cost of forex now. To get alternative fuels to power production, for example, is not easy as vandalism has made getting gas virtually impossible. The cost of getting LPFO, which is not available here and we have to import, is about five times the cost of getting gas. And there are the prices of trucks, which are not manufactured here and have to be imported, with the cost of sourcing forex to import them so high.
Towards addressing its power supply challenge, AshakaCem once announced its plan to build a $100 million coal-powered, coal-fired generating plant. At what stage is that plan?
I just came back from Brussels, where we signed a contract to that effect. We hope to get that project going by September and, God willing, we should be generating power in the first half of 2018. It is a 16-megawatt project scheduled to be done in 21 months. The first phase is billed to cost $42m,which will enable us generate enough power to optimise our cost position and reduce our operational expense.
It will also have the dual benefit of releasing power from our grid into the public domain. Basically, we are releasing that for public consumption.
Would that be part of Ashakacem’s social responsibilities to its immediate communities, or is it being designed to be a revenue-generating business model?
Talking of CSR is an aspect of our service to our communities. But what we look at is a bit more robust. For both AshakaCem and Lafarge Africa, our drive is sustainable development, which we hinge on some pillars. One is economic empowerment whereby we strive to empower the communities around us. The second is education and the third is health.
When you look at health, today, in Ashaka, we have a clinic which attends, on the average, to 200 people everyday free of charge. To me, that is the basic form of support to the community because health is wealth, and as we know, good healthcare delivery is a serious problem in the country. We also have a HIV counselling centre. I haven’t seen a better equipped community clinic elsewhere in Nigeria, and to demonstrate that, our own staff go there. On education, we give scholarships to the community’s citizens, as we also have an employment quota that we take from the community. We have an apprenticeship scheme where we have a fully-equipped centre that trains about 200 people every year. After training, we also give them tools to start work. On many occasions, we bring them back into the system as contractors because, in truth, if you don’t generate such an eco-system of sustainable development, there is no CSR. We build classrooms and similar structures every year, but we don’t see that as the main driver of CSR.
On economic empowerment, we generate what we call a geo-cycle. Essentially, what a geo-cycle does is, in some sense, economically empower the community. A good example is applying the rice husk. As I said, we use a lot of energy. So what we do is to collect by-products from farmers and store them. What that does, for one, is to take away from the community rice dirt that would have created a mess and put it into the kiln. In the process, the farmer is generating additional income from what he does. When you build that into a pile, you have essentially created empowerment for the farmer who does 100 bags a year to work harder to produce 1000 bags because of the additional income. Even the little he does, he earns much money. So what we do is not to just give out money to anybody, or just build classrooms, but to create an eco-cycle that provides an umbrella of economic empowerment for everybody.
What are Lafarge Africa’s short-to-medium term expansion plans for AshakaCem?
In 2014, we had a ground-breaking ceremony for a new line in Ashaka. Unfortunately, before we got to mobilisation, the insurgency problem worsened. We needed to bring in a lot of people, about 400 expatriates, to build the plant. With that insurgency development, it became challenging to get anybody to come in to build the line. Therefore, we had to withdraw and then restrategise till when the situation gets better.
Part one of that project was to do the captive power plant , which is going on, so we’ve already made some progress in that direction. We’ve not changed our stand on the new line. AshakaCem is an integral part of the Lafarge group and will be given a lot of attention. For the group, AshakaCem falls in the group of top priority plants. The company has a lot of advantages. Looking at it, it is the only big company, the only public limited company (PLC) in the North-East and we don’t want to see it remain where it is.
Dangote Cement, Lafarge’s major competitor in Nigeria, has been stressing that building roads with cement is more durable than using asphalt. Lafarge has been somewhat silent on this. Doesn’t Lafarge key in into this concept?
It is a proven fact that concrete roads last longer than asphalt ones. It is a claim backed by research because in developed economies, some cement-built roads go back hundreds of years. There are many advantages in building roads with concrete. The weight put on roads goes down very deep and with asphalt, it will break down quicker while concrete will remain because it is in situ. And when you have a maintenance problem with concrete roads, you just remove the portion that is bad, but it needs to be fixed properly.
Yes, we have solutions to concrete roads, and we are discussing those solutions at different levels. At our plant in Calabar, we are building a concrete road. In Ashaka, where we are building our coal plant, we are also building an eight-kilometre road using concrete. These demonstrate that concrete really works
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