FREE

CEMENT COMPANY OF NORTHERN NIGERIA PLC COMPANY UPDATE - Completes Sokoto plant expansion

CCNN recently announced that it would be commissioning a new production line with an annual capacity of 1.5 million MT, increasing the company’s cement annual production capacity to 2 million MT. This expansion will be the first major investment in CCNN since the BUA group took controlling interest in CCNN in 2010. We understand that the line, built for an estimated $350 million, is configured to run on multiple fuel sources particularly LPFO and coal. The expansion also comes with a 32MW captive power plant which we expect to be used to power non-kiln operations of CCNN, with the excess likely to be sold to the grid.

We expect the expansion to support earnings over the long term given that the company’s sales had been capped by its 0.5 million MT capacity for a while now. We also expect CCNN to benefit from economies of scale and increased efficiency from a newer plant. Furthermore, we see value in the increased fuel flexibility of the newer plant. All in, we believe that the expansion is positive for the company as it puts CCNN in a better position to take advantage of increased cement demand and the favorable outlook for the sector. However, pending further details of the plant operations, we retain our previous target price.