On the evening of December 1, Huaxin Cement announced that the company plans to spend 0.838 billion US dollars to purchase related equity assets and will eventually hold 83.81% of the shares of a listed company in Nigeria. After the merger and acquisition is completed, the Nigeria plant will become an important strategic fulcrum for Huaxin Cement in West Africa, helping it rapidly expand the West African market.

Affected by this news, Huaxin Cement's A shares rose and stopped today, rising 6.32% to $13.80; H shares opened higher and are now up 4.72% to HK$7.98.

Proposed acquisition of an African cement company for US$0.838 billion

According to the announcement, the company plans to acquire 100% of the shares in Caricement B.V. HolderFin B.V., with approximately 0.56 billion US dollars in cash through Hainan Huaxin Pan Africa Investment Co., Ltd., a wholly-owned holding subsidiary. As of the announcement disclosure date, 90% of Caricement B.V.'s assets are 56.04% of its shares in Lafarge Africa Plc.

Meanwhile, Huaxin Cement plans to acquire Davis Peak held by HolderFin B.V., with approximately 0.278 billion dollars in cash after AssociatedInternational Cement Limited transfers 27.77% of its shares in Lafarge Africa Plc to Davis Peak Holdings Limited through its wholly-owned subsidiary Huaxin (Hong Kong) International Holdings Limited 100% equity in Holdings Limited.

Since Holderfin B.V. holds 100% of the shares in Holchin B.V., the largest shareholder of Huaxin Cement (the largest shareholder of the Company held 40.19% of the Company's shares as of the disclosure date of this announcement), it is a wholly-owned subsidiary of Holcim Limited. According to regulations, this transaction constitutes a related transaction, but does not constitute a major asset restructuring.

According to reports, Lafarge Africa Plc was incorporated in Nigeria on February 26, 1959, and listed on the Nigeria Stock Exchange in 1979. The issued and paid up share capital is approximately 8.054 billion naira. The company is mainly engaged in the production and sale of cement, concrete and other building materials products. Currently, it has 4 large-scale cement plants and 6 concrete plants in Nigeria. Its business covers the national market in Nigeria, with a cement production capacity of 10.6 million tons/year and a concrete production capacity of 0.4 million square meters/year.

After the transaction is completed, Huaxin Cement will indirectly hold 83.81% of Lafarge Africa Plc's shares.

The industry has great potential for development

In recent years, due to the decline in real estate investment and the slow progress of infrastructure projects, demand in the national cement market has declined rapidly, and the capacity utilization rate has also been drastically reduced.

Some agencies predict that in the first three quarters of this year, the total profit of the national cement industry will drop sharply by about 65% compared to the same period last year. The industry's sales margin has also fallen to less than 2%, and total profit has dropped to the lowest level of profit for the same period since 2006.

In this context, many regions have also ushered in a new round of price increases. Dealers say this is “the last struggle in 2024.”

It hasn't risen in less than half a year, so it's unlikely that the market will turn around in the last month.

It is worth noting that in the face of market difficulties, many companies have chosen to seek change, or use mergers and acquisitions, or accelerate their entry into overseas markets through self-construction. Examples include China Building Materials, Conch Cement, Huaxin Cement, Red Lion Group, Western Cement, etc.

Huaxin Cement proposed a new development strategy in 2011 to step up efforts to develop neighboring emerging economies and seize the development opportunities of the cement industry in emerging economies.

On August 25 of the same year, the company reached a cooperation agreement with the Tajik government and decided to invest in the construction of a new dry cement clinker production line with an annual output of 1 million tons in the country. This also marked the official launch of Huaxin Cement's international strategy to go overseas.

Today, overseas development has brought considerable benefits to Huaxin Cement. From January to September of this year, overseas sales of cement and commercial clinker were 12.0463 million tons, up 41% year on year; achieved operating income of 5.936 billion yuan, up 49% year on year; realized net profit of 0.847 billion yuan, up 32% year on year.

The company pointed out that as of September 30, 2024, the company has established cement production networks in 12 countries including Tajikistan, Kyrgyzstan, and Uzbekistan. Overseas cement clinker production capacity is 15.44 million tons/year, and cement grinding capacity is 22.54 million tons/year.

Regarding the future development of the Nigerian market, Huaxin Cement said that the region has great potential for economic development, a good industry pattern, and a promising market, which is expected to become a bridgehead for the company's development in West Africa. There are only 3 cement companies in Nigeria, and the largest cement manufacturer accounts for more than 50% of the market share. In addition, the current per capita annual cement consumption is only 140 kilograms, so the cement industry has great potential for development.