Kuwait's cement consumption to exceed 5.2mln tons in 2007
KUWAIT: Boodai Enterprises Company announced Friday a strategic partnership with Italcementi with the sale of a 47 percent equity interest in Hilal Cement Company for $45 million to Italcementi through Egypt-based Suez Cement Company. Hilal Cement Company currently features a capacity which could be scaled up to 2 to 2.5 million tons to accommodate expansion plans. The deal advised by GulfMerger, values Hilal Cement Company at approximately KD25 million, corresponding approximately to $89 million. Following this sale, Boodai Enterprises Company and related companies will remain the second largest shareholder in Hilal Cement Company. As a result of this strategic partnership, Boodai Enterprises Company expects far reaching positive implications for Kuwait, the cement sector in Kuwait and for all shareholders of Hilal Cement Company.
Italcementi manages a global annual production capacity of approximately 70 million tons of cement comprising an industrial network of 62 cement plants, 15 grinding centres, 3 terminals, 152 aggregates quarries and 588 concrete batching units. In 2006, Italcementi generated sales of approximately $8 billion. The partnership with Italcementi is the result of a strategy announced by Hilal Cement Company earlier this year at which time its Chairman, Yacoub Al Sharhan, announced that "the company would be seeking a strategic partnership with strategic investors able to add value to our business." With a share of approximately 17 percent of the cement consumption market in Kuwait, Hilal Cement Company is the third largest cement company, operating two terminals for the import of cement. In 2006, Hilal Cement Company sold 736,000 tons, generating approximately KD18 million in revenues, corresponding to approximately $65 million.
As financial advisor to Boodai Enterprises Company, GulfMerger approached approximately thirty potential buyers not only in Kuwait or the region, but also worldwide to ultimately complete the sale with Italcementi. "Clearly, the entry of Italcementi into Kuwait should act as a more visible catalyst for further international companies to acquire important equity interests in companies in Kuwait and add value to the local economy and its employment" said Yann Pavie.
Witnessing
Kuwait is witnessing rapid growth in cement consumption. Cement consumption in Kuwait has doubled from 2.3 million tons in 2000 to an estimated 4.6 million tons in 2006. In 2007, cement consumption is expected to exceed 5.2 million tons with current forecasts putting cement consumption at over 7 million tons by 2011, should government authorities move more dynamically on key infrastructure and construction projects. As a result, Kuwait will continue to consolidate its position as the third largest cement market in the GCC region in 2006, after Saudi Arabia (25 million tons) and the United Arab Emirates (15 million tons).
In Kuwait, cement consumption forecasts of over 7 million tons by 2011 are based on a population growing from 3 million inhabitants in 2005 to over 4 million inhabitants by 2011 and continued strength in oil prices. Cement consumption per capita has grown from 1,000 Kilograms per capita in 2000 to 1,500 Kilograms in 2005 and is expected to expand to 1,700 Kilograms by 2011. This will be driven by over KD 30 billion worth of infrastructure and construction projects expected to be implemented in the next five years in Kuwait. Key projects expected to contribute to cement consumption include the development of new townhouses, expansion of the road network and the replacement of old government buildings.
The forecast does not assume the development of Silk City, which alone would have the strongest positive impact on cement, increasing cement consumption well above 9 million tons by 2011. Hilal Cement Company expects the partnership with Italcementi to help the State of Kuwait and the private sector secure all current and future cement needs, regardless of any economic growth scenario facing the country. "Clearly, having the capabilities of Italcementi behind Hilal Cement Company and considering the present infrastructure of the company in Kuwait, we expect Hilal Cement Company to improve its market position and become a more important cement supplier in the country" said Yacoub Al Sharhan.
The investment in Hilal Cement Company by Italcementi amounting to approximately $45 million is one of the largest single foreign direct investments made in Kuwait which totaled approximately $250 million in 2005. It is in line with the State of Kuwait's strategy to encourage foreign direct investments in the country to support key economic sectors and ensure that Kuwait is well equipped to face future economic conditions. The acquisition of 47 percent of Hilal Cement Company by Italcementi was completed in accordance with regulations of the Kuwait Stock Exchange. NBK Brokerage assumed the role of broker on behalf of Boodai Enterprises Company and Italcementi ensuring the smooth execution of the transaction in accordance with regulations of the Kuwait Stock Exchange.
© Arab Times 2007
