Cement market has growth potential despite current economic challenges

Michel Puchercos is the Chief Executive Officer (CEO) of Lafarge Africa Plc in Nigeria and assumed office in April 2016.A French national, he trained as an engineer at Ecole Polytechnique and the National School of Rural Engineering, Waterways & Forests, France. Puchercos spoke to a select group of journalists in his first interview as Lafarge CEO in Nigeria as captured by Joseph Onyekwere.

What are you bringing into Lafarge Nigeria at this time of economic difficulties?
My experiences are really useful for strategy and operations. I want to improve performance in Nigeria. 2016 as you know was a very challenging one from the operations stand point – gas shortage, foreign exchange challenges and so on. These would help me make short-term decisions. How do we anticipate the future in the light of these gas shortages? That is where operational skills and stratetic vision can help. I will balance both.

Also, my knowledge of Africa will help. From customer point of view, if you go to South Korea, 95 per cent of cement is sold both tankers to ready mixers. This is the extreme. But in Nigeria, 99 per cent of cements are sold in bags, with few percentage to contractors and very little quantity to ready mix. I have seen the extreme and I know where we stand and I know the way the market would change. It would definitely change because it is a natural transformation of the cement market. All over the world, it starts with bags, retails and distributions, then develop to ready mix. From there business becomes a strategic decision. That is why my predecessors started developing ready mix in Nigeria to anticipate the move.

In the short time you have stayed, what can you say about Nigeria?
Nigerian cement market is dynamic and has great potential for continued growth, despite the current economic challenges. The huge population, level of infrastructural development and massive desire for housing are positive indicators. Low per capita consumption (about 100). Focus on infrastructure development by current government is quite encouraging. The people are warm and committed. Hence, there is great focus and high expectations from the LafargeHolcim Group.

Please elaborate a bit more on LafargeHolcim’s commitment to continue to do business in Nigeria despite the challenges
It is a known fact that we have been in business in Nigeria for over five decades now. Following the backward integration policy of the government, our operations grew from 3mt in 2008 to 8.5mt in 2012, with investment of over 1bn Euros. Further investment of over $565m is currently being made in the additional 2.5 million tonnes capacity cement plant in Mfamosing, Calabar, Cross River State. The plant will be officially commissioned soon.

With this, we have a combined capacity of 10.5 million metric tons of cement from our operations in Ashaka Cement (Gombe State), UniCem in Cross River State, WAPCO operations in Ogun state and Atlas Cement in Rivers State. We have announced plans and performed a Ground Breaking Ceremony for a 2.5 million ton expansion in plant capacity at Ashaka. In addition, we are constructing an N11bn Captive Power plant also at Ashaka, Gombe State. We are the leading readymix concrete producer through our Lafarge Readymix Nigeria operations in Lagos, Ewekoro, Abuja, and Port-Harcourt, with plan to spread to other states of Nigeria in the near future to contribute innovative solutions to the building and construction industries. Outside the oil and gas and telecommunications industries, LafargeHolcim, is the largest foreign investor in Nigeria.

How would you assess Lafarge Africa in 2016?
No doubt, 2016 has been a challenging year not just for Lafarge Africa, but for all businesses in Nigeria, for obvious reasons. For us, the reasons are mostly external – gas supply, logistics challenges due to the nature of our roads, lack of spare parts, increase in fuel costs, no or low access to explosives as well as foreign exchange, inflation and devaluation. Despite the external challenges this year, we have had a very positive, very promising and better cost performance improvement compared to last year. We look forward to improvements in these areas for the rest of the year.

What projections do you have for Lafarge in 2017?
We are quite optimistic that all the indices will get better in 2017, and there will be overall improved performance.

A big input cost for cement manufacturers is energy and power. How has your company been coping with the issue of energy and power supply in Nigeria?
Supply availability and cost of energy (fuel and electric power) have been major issues for cement manufacturers in Nigeria over time. Over the years, we have invested on projects that guarantee fuel flexibility in all our operations. Apart from the consideration of economics, the use of natural gas as our main energy source has turned out to be effective in the goal to reduce the carbon footprint of our industrial process compared to other fossil fuel. Alternative sources of energy (Biomass, Industrial Waste, Municipal Waste, Tyres, and Coal). We have a 310MW Power Project (of which 90MW is already completed) in Ewekoro, as our contribution to the current power generation in Nigeria.

A good number of companies have been reporting negative results in recent time due to the economic downturn. Now that you are here, what do you intend to do to improve the company’s books and meet shareholders’ objectives?
For me, it is simply by motivating the team for improved performance. By being anticipatory and making the right investments within available budget. We also need to be mindful of our costs and avoid ‘business as usual’. Our Nigerian loan has been refinanced at a cheaper rate, while we are currently restructuring the USD loan.

The delisting of Ashakacem, one of your operations is currently being pursued. Could this be as a result of the economic recession?
The delisting of AshakaCem is a transaction initiated by its Board of Directors. It is not due to current economic recession, which we believe is a passing phase. Recent evolution of the shareholding of AshakaCem has meant that today, the free float (tradable shares) of the Company on the NSE is below the minimum threshold permissible. Minimum Free Float permissible by the NSE Listing rule is 20 per cent, Ashaka currently has 15.03 per cent. The Directors of the Company decided to be proactive to launch a Voluntary Delisting rather than waiting for a regulatory delisting.

The housing deficit in Nigeria at the moment is put at 17 million units. What do you think is the way out of the problem, as a building solutions giant?
It is gladdening to see and hear about commitment of successive governments in Nigeria to affordable housing. Federal Government launched the National Mortgage Refinance Company (NMRC) that is aiming at reducing the rates of mortgages proposed by mortgage institutions to single or low double digit. Included in this initiative is a possibility for developers to lower their costs of financing. Better structured Public Private Partnerships required. Government and Private sector plays a key role in provision of mass housing all over the world. Professionalism is required in construction to make it worthwhile, and this is what these bodies offer. This is even more required in developing countries where there is less patronage for professionals for several reasons. Ease of land acquisition and documentation is also critical.

What is the motivation behind your organisation’s corporate social responsibility going by your recent National Literacy Competition and the SERAs awards?
Our corporate social responsibility is neither philanthropic nor ad-hoc, but intrinsic to our business strategy with focus on the 2030 plan, stakeholder management, community development, National CSR Projects, Volunteering, Donations, and Sponsorships. Lafarge Africa’s Social investment for its host communities is needs-based, strategic, and highly sustainable. Our CSR approach recognizes the host communities as strategic partners to whom we accord mutual respect, believing that our footprints should, in its overall assessment, be a blessing to our neighbours.Lafarge Africa continually makes investments woven around health and safety, economic empowerment, education, shelter and community support as a good corporate citizen. Our track records speak volume with several notable awards to show for them.

Tell us about yourself and your background.
I am an engineer and a French national. I have worked in South Korea, Kenya and Uganda, Tanzania and France, and speak various languages including French, English, Korean, Spanish and Swahili. In the course of my career, I have had extensive operational and strategic experience both at junior and senior levels with small and medium organizations, cooperatives and multinationals organisations. I had worked in the French Ministry of Agriculture, and later as General Manager and Executive Vice President in the Biochemistry and Food industry, before joining the legacy Lafarge.

I came into Lafarge as Head, Strategy and Purchasing in Orsan, Lafarge Biochemistry, and in 1998 became Director of Cement Strategy and Information Systems, Lafarge Gypsum. In 2003, I became the Director of Cement strategy, Lafarge Group in France.
I moved into cement operations in 2005 as the CEO for Lafarge operations in Kenya and Uganda while doubling as the Chairman of Tanzania operations. After four years in Sub-Saharan Africa, I moved to Asia as the President and CEO of Lafarge South Korea, where I remained for seven years. I came into Nigeria as Country CEO for Lafarge Africa Plc in April, this year.