CAIRO: The Egyptian unit of Greek cement maker Titan will consider bidding in tenders to build new factories but is also growing rapidly in ready-mix cement to keep expanding while keeping costs down, a Titan executive said.
"If there is any opportunity (for bidding) we will see the pros and cons and will participate of course. But this is not the only way to increase capacity," Titan Cement Egypt’s (TCE) Group Commercial Director Medhat Stefanos in an interview.
Egypt was Titan’s only growth market last year, helping limit a decline in sales linked to the US housing market crisis and a recession in its home market of Greece.
Egyptian cement demand soared 25 percent in 2009 due to a housing boom and moves to upgrade road, port, rail and utility infrastructure to deal with a soaring population.
Now a government decision to phase out energy subsidies for fuel-intensive industries could limit the scope for profitable growth for cement firms in the country.
Cement for ready-mix tends to sell for more than bagged cement, making it more likely to stay profitable if energy costs rise, and building a ready-mix factory takes less capital than a full-scale cement plant.
Adding capacity with a brand new production site would mean high costs that consumers could find hard to bear, said Stefanos.
"You can increase capacity with some diversification in the product mix," Stefanos said. "We started (ready-mix) in Alexandria but we are soon expanding in Cairo as well. During 2011 we are going to add another two plants for ready mix."
Titan’s Egyptian subsidiary reached annual output capacity of 5 million tons after a 1.5 million ton-per-year line worth LE 1 billion ($172.5 million) was opened by its Beni Suef Cement unit earlier in the year, company officials said.
Stefanos said he was confident that Egypt’s cement market will grow by up to 5 percent annually if a government goal of 7 percent yearly gross domestic product growth is achieved.
He said consumption of cement in Egypt was around 600 kg per capita.
"The experience with other markets similar to the Egyptian market show that there is room up to 1,000 kg per capita in Egypt," he said. "So all the factors that can support the growth in the market are there."
In March 2010, TCE said the World Bank’s investment arm International Finance Corporation (IFC) agreed to invest €80 million ($107.3 million) to buy a 16 percent stake in TCE subsidiary Alexandria Cement.
"The value-added of this is to have enough money to capture whatever opportunity for growth comes within Egypt or even outside," said Stefanos.
